fiiiiuiiiiiiiiiiiiiiiiiniiiiiiiiiiiiiiiiiiiiiiiiiyiiiiiiiuiiiiiiiiiii^ I I I Official Proceedings | I Central States Conference | i on M m g I Rail and Water | I Transportation | HIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIMIIIIIIIIIIIIIIIIIIIIl Ftb 2 4 19a Under the Auspices of the Evansville Chamber of Commerce Evansville, Ind. December 14-15, 1916 Official Proceedings FEB 24 1917 of Central States Conference on Rail and Water Transportation Held Under the Auspices of the Evansville Chamber of Commerce Evansville, Indiana December 14 and 15, 1916 FOREWORD Realizing the vital interest of the business men of the nation in a sound solution of the problems involved in the question of transportation legislation, now engaging the attention of the administration and Con- gress, it was suggested to the Evansville Chamber of Commerce by Mr. Henry C. Murphy, its retiring president and a member of its Board of Directors, that this Chamber of Commerce might render a valuable public service. Mr. Murphy's plan, which has since come to be widely known as "The Evansville Plan", was outlined to the directors of the Evansville Chamber of Commerce, and approved by them on November 11th, 1916, and was consummated in the Central States Conference on Rail and Water Transportation, held in Evansville, Indiana, on Thursday and Fri- day, December 14th and 15th, 1916. The purpose of the Conference was to arouse business men to a reali- zation of their interest and responsibility in the formulation of legisla- tion on the subject of transportation. It M'as thought that if a conference of business men, representative of the six central western states, Indiana, Ohio, Kentucky, Tennessee, Missouri and Illinois, should be arranged, with a program including addresses by men of national prominence and importance, representative of all sides of the transportation question, namely: the Railways, Labor, the Investor, the Shipper and the Public; and providing also for open discussions by participants in the Conference, so that each might have an opportunity to present his views and his judg- ment of the attitude of his community as he conceived it, the way might be paved for much helpful publicity of the transportation problems, not only in the region covered by the Conference, but throughout the nation. From the attrition of minds thus brought together in earnest discussion and enlightened by the presentation of the various aspects of the subject by leading authorities, it was thought some common ground of agreement on at least some phases of the subject might be found and expressed in resolutions reflecting prevailing sentiment of the Conference. Thus a stimulus might be given to the discussion of the transportation problem through the adoption by other cities of the "Evansville Plan" or in some other way devised "by them. The idea of having a regional Conference comprising six states was that in this way efforts might be concentrated, and business men and rep- resentatives of civic organizations might attend with little expense and loss of time. Upon this theory the plan was prosecuted. In more than two hundred and fifty cities and towns in the six states, the newspapers, the leading business men, including the officers and di- rectors of all the banks, and all of the Chambers of Commerce and other civic organizations, were furnished with the program of the Conference and full information about its purpose and scope. Forty thousand circulars and programs were distributed. More than three hundred commercial organizations were furnished with literature. "^r O and over twenty-five thousand letters were sent out by the Evansville Chamber of Commerce. Fifteen thousand telephone messages calling attention to the Confer- ence in over two hundred cities and towns, were delivered by local tele- phone to carefully selected lists of prominent and public spirited busi- ness men. More than three hundred newspapers in the six states carried articles on the Conference, and many of them also commendatory editorials. In other states, from coast to coast, the leading dailies carried articles on the Conference and its possibilities. Thus, as was contemplated, a vast amount of most valuable publicity was given to the vital importance of the transportation question. The President of the United States, members of Congress, and lead- ers in the movement for constructive legislation for the best interest of the nation, have expressed their unqualified approval of the purpose of the Conference and their interest in its results. During the first morning session of the Conference, President Wilson sent the following message by telegraph: "May I not send my greetings to the Central States Transportation Conference and express my deep interest in the great questions it has as- sembled to discuss. I wish that I might have the benefit of hearing these discussions." (Signed) WOODROW WILSON. It is confidently hoped that the wide distribution which will be made of this report of the proceedings of the Conference will serve to stimulate further discussion of the question and aid the law-makers in formulating sound and constructive legislation. Evansville, Ind. EVANSVILLE CHAMBER OF COMMERCE. THE CENtRAL STATES CONFERENCE THE CENTRAL STATES CONFERENCE The Conference was called to order at 10 a. m. Thursday, December 14, 1916, by Chairman Henry C. Murphy, publisher of the Evansville Courier, with delegates and visitors from Indiana, Illinois, Tennessee, Ohio, Kentucky and Missouri in attendance. Following the invocation by Rev. William N. Dresel, of Evansville, Mayor Benjamin Bosse delivered a cordial address of welcome, into which he introduced many pertinent and significant allusions to the dif- ficulties involved in any proper solution of the transportation problems. Chairman Murphy then addressed the Conference as follows, his sub- ject being "Purpose and Scope of The Central States Conference." Plan to Build Up Carrying Facilities. If I have a correct conception of the purpose of this conference, We are here, not to damn the public, as did a famed railroad magnate in an ill-considered moment, nor to damn the railroads, as too many hot tempered Americans have been doing for many years. Instead, we have come to this meeting to help to dam the waterways that they may serve their full function as real factors in our national system of transporta- tion. Finally, we are here to develop and adopt a constructive program that may contribute in some measure to dam the flood of adverse criti- cism and hostle legislation to which the American systems of transpor- tation have been subjected for more than a decade — legislation and criti- cism that has retarded progress, growth and development, not only of the railways and waterways, but of the business of the nation — your business and my business. xi. ^ * * Huxley defined the first agnostic as the man who was the first to see that clear knowledge of what one does not know is quite as important as knowing what one does know. The sanctification of doubt had its origin in the intellectual and moral strength of Socrates, to be further sancti- fied in a later century by the luminous mathematician Descartes. Had Huxley's agnostic been fortunate enough to be associated with the intel- lectual followers of Socrates and Descartes and had the group been faced with a transportation problem such as we face today they promptly would have called a conference and invited to it the Thoms, Lees, Walshs, Trumbulls, Muirs, Kingsburys, Lathrops. Leighs, Bellevilles and Thornes of their day. After listening to the views and judgments of these men they would have formed honest, just conclusions, settled on a defi- nite,' thorough and adaptable policy, and, through it, found a way out of their difficulties. THE CENTRAL STATES CONFERENCE 5 All Not Well With Transportation The Central States conference, which we today bring into being, is composed, I hope and believe, of doubters of the Huxley type. Each of us comes here with the knowledge, vague or certain, that all is not well with the transportation systems of the United States; that the doctors and nurses are worried about their patients' condition; that the remedies previously administered have had but temporary beneficial effect. Some of us are optimistic enough to believe the attack merely an insignificant indisposition, due to high living and a consequent inactive liver, to be alleviated by time and clearer weather. Others regard the illness as more serious, but not necessarily fatal. Their theory is that the patient is suffering from mal-nutrition, due to too economical supervision of diet by a parsimonious guardian, and that a speedy cure can readily be accomplished by furnishing a larger and more varied regimen of food and drink, expressed in terms of higher tariffs, with relief from the mischievous, nerve-racking demands for small change and frequent holidays of the patients' children, as represented by labor unions. Some of us may be utter pessimists, thoroughly discouraged and dis- traught, certain that the malady is of a fatal nature, which will respond to no treatment, however scientific. Such believe the very vitals of the patient are so diseased that it is folly even to attempt to stay the surgeon's knife. They see the undertaker, in the person of Uncle Samuel, just be- yond the portals of the sorrowing household and, as discerning, provi- dent and time-saving men, they would call in that undertaker, even though the corpse is not ready. They argue he is a busy person, this un- dertaker, and economy for him and everybody concerned will result if he can have a look about, measure the almost moribund shape on the bed, and start making preparations for what is to happen the day after to- morrow. Further than this, they would bring in the lawyer and appraiser that a quick inventory be made of the chattels and realty of the about-to- be lamented. Diversity of Opinion To repeat, each of us is convinced there is sickness in the house, though the authorities have not yet tacked up the yellow flag. Probably each man before me has a well-defined opinion of the course properly to be pursued by the medical men who are in charge of the situation — our nation's president — the surgeon-in-chief — and his assistants— the members of the Interstate Commerce board. Congress and the various state commissions. Diversity of opinion as to what serum should be in- jected to aid the sick body is common among us. Each one of us may think himself fully competent to diagnose the ailrpent and treat the ill person and too many of us, I fear, are inclined to proceed in haste, using the remedies within easy reach, while some, and they are not an insigni- ficant few, favor a quick incision with the scalpel. One of the main reasons for America's commercial supremacy is to be found in the personal egotism of the American business man. His in- nate esteem for his own capacity leads him to attack any problem and any undertaking, no matter what its proportions, with sublime self-con- fidence and assurance that brooks no thought of failure. He has conquered equally perplexing situations before and is disturbed by no fear that a so- lution to the vexed new question is impossible. Our conference is representative of American business men of this very type, and their piesence here in such large numbers leads me to think they are about to attack another problem. This question, though not new, in recent months has presented phases that are constantly changing as kaleidoscopic variations occur in our industrial and commercial life. This problem— the grave, internal question confronting the American people today — is defined tersely, yet completely, in the query, "What shall be done for and with the American railways and waterways?" We are 6 THE CENTRAL STATES CONFERENCE here at this conference to answer that question for the business men of the Central States. President Wilson Interested When the plan of the Evansville conference was outlined to Presi- dent Wilson, he caught its significance immediately and enthusia;5tically applauded the idea, voicing a hope that other cities may follow Evans- ville's lead with the result that regional conferences all over the United States might be called. The president further gave it as his opinion that constructive policies should result from our deliberations and praised a movement broad enough to include in its program every side and angle of the transportation question. I mention Mr. Wilson's views, not with the thought of exploiting our initial adventure in the uncharted wilds of business congresses, nor to emphasize the worthiness of our idea, but rather to indicate the trend of the executive's thought. As I view this expression, I take it that he feels the need of suggestion and counsel, and he looks to the business men of East, West, North and South to volunteer as guides to lead him and con- gress out of the Hercynian forest. I may exaggerate the importance of this conference and the other sectional councils that are sure to succeed it, but it is my firm belief that only by means of these assemblages will be found a just and true solution of the transportation problem. The whole tru+.h about the railways is not to be discovered at a board meeting of railway presidents, nor in a con- clave of brotherhood trainmen, nor in a shippers' convention, nor yet in the sessions of congress or of the commissions handling transportation matters. But it may be dug out of the ma^s of testimony offered by the witnesses for the various sides to this controversy and it will be revealed if we are honest in our search for it and listen with impartial ear to the advocates of the various parties at interest. The task is one to appall a Sisyphos, but Americans tolerate no laissez faire policy when vital issues are at stake. Magnitude of the Problem Statistics are exceeding tiresome and should not be allowed to intrude themselves in a well-ordered conference. Realizing this, I hesi- tate to offer figures, but I want every individual here to realize the magni- tude of the problem with which we deal. To do this, you must know we are concerned with questions involving railroads which operate over 380,- 000 miles of track, with investments in road and equipment aggregating over twenty billions of dollars. When we comprehend that this vast sum represents fully as much as the total wealth of a great nation like Italy, we are staggered by its significance. These roads, and I should explain I do not include the intra-state carriers in these figures, but only those reporting to Washington, carry over a billion passengers per year and transport freight amountins; fo nearly two and one-half billion tons. The annual gross revenues of these carriers now exceed three billions with a yearly distribution for expense of approximately $2,500,000,000. In the management and operation of these systems, nearly two millions of individuals find employment — the number varying by hundreds of thousands with the ebb and flow of pros- perity and its hand maiden, Commerce. The figures are astonishing by reason of their immensity and the problems that confront government in its regulation of the carriers and the railways in their relation to government and people are equa ly be- wildering. Within the past sixty days the significant announcement was publish- ed that 1,100 miles of new railways in China had been financed by Ameri- can capital and would be constructed under American supervision. The work will require an expenditure of approximately $100,000,000. Do you find pregnant meaning in that announcement of the American International Corporation? You will when you think of it in connection THE CENTRAL STATES CONFERENCE 7 with the difficulties American railroads have in obtaining capital needed for rehabilitation and development. With the stock of money gold in this country standing at $2,750,000,000 — an increase of $700,000,000 over a year back — with $4,500,000,000 of actual money in circulation among our people, with business at such a peak that the railroads are 108,000 cars short of the urgent demand — with all these evidences of utterly unprecedented material well being, where could one find a man or group of men, willing to finance and consti'uct 1,100 miles of new railway in the United States? I venture the belief that the needed cap- ital would be hard to find. Only 2,500 miles of rail were laid in the United States in 1914, and in 1915 the new mileage laid down was insignificant — less, I have read, than was built in any single year since the Civil War. Since 1906 our total mileage has increased only 28,000 whereas our proper internal de- velopment demanded an increase of 100,000 miles. aieaning to Business and the Home The import of this tremendously significant fact has dawned on the man who is paying $4.00 or $5.00 per ton for coal, whereas his usual cost is under $3 and to the housekeeper who checks his or her monthly gro- cery, butcher and department store accounts. The high cost of living, about which newspaper paragraphers love to dilate, has a direct relation to the lack of railroad development. And back of this insufficiency of mileage is the timidity of capital and back of this timidity of capital is the reckless and dishonest railway management of an earlier era and the consequent destructive public criticism and hostile legislation. It is axiomatic that the permanent prosperity of the nation and of business in general can not be disassociated from the prosperity of the railways. One is utterly dependent upon the other. Prosperity is epi- demic in America today, but the stabilization of railway credit is as far distant, despite prosperity, as it was in the lean days before we were en- gulfed by the tidal wave of foreign gold. Just as good wagon roads bring reduced operating cost to the farmer and lowered living expenses to the city workman so highly developed railways, constantly growing and expanding with the country's growth and development, will bring similar and larger benefits in which we all shall share. More attentuated remarks from the temporary chairman might have been expected and relished, but I have deemed it wise to elaborate fully the diverse issues that confront us. I have introduced little as bearing on the needs of waterways and I want just a word on that topic. So long as the great newspapers of America — journals like the Chicago Tribune, New York Sun, Boston Herald, Philadelphia Ledger and others equally promi- nent — persist in associating the word "pork" with the canalization of our great inland water carriers, such as the Ohio, the Mississippi and the Mis- souri; so long as they connect these absolutely worthy plans with the im- provement of Bilious Creek and Stickfoot Lake, just so long we shall have a popular misconception of honest, necessary — nay, vital projects, I need not tell you that the popular misconceptions produce no construc- tive congressional legislation and mighty few dollars in the way of appropriations. Cannot Remain Neutral The business interests of this land cannot remain neutral and uncon- cerned in the present situation. We must cease being commuters on the line of least resistance. If politicians are to be the pilots of the trans- portation ship they will steer a course for the harbor of government owner- ship. Siren voices will sing the glories of that calm refuge for storm wrecked ship and sailors. If we are wise we shall follow the advice of Circe to Ulysses and stop our ears with wax to avoid the enchanting re- frain. My plea today is that you gentlemen who honor Evansville by 8 THE CENTRAL STATES CONFERENCE your presence give to the coming speeches and debates calm, dispassionate attention. Hear each and every side before you pass your final judg- ment. Whatever your present emotional bias, and I fear each of us is conscious of some emotion and some bias, I urge that it be set aside and forgotten, that all the evidence may be weighed conscientiously before a verdict is rendered. My fervent hope is that we may equal the expectations of Woodrow Wilson and by the attrition of many minds give to America the sensible, just, progressive and sane solution of our transportation problem. After a brief discussion among the delegates concerning the order of procedure, Henry C. Murphy was elected permanent chairman and Robert Bonham secretary of the Conference. The delegates then voted unanimously to adopt the following plan of procedure: 1. All non-resident participants in the Conference shall register with the Secretary. 2. Only registered participants and members of the Evansville Chamber of Commerce shall be entitled to a voice and vote in the Con- ference proceedings. 3. The order of business shall follow the printed program prepared for the Conference. 4. A five minute limit shall apply to all remarks outside the pro- gram, unless express consent be given by the Conference. 5. All voting shall be viva voce or by division. 6. The Chairman of the Conference shall appoint a committee of eleven on resolutions and this committee's report shall come up for dis- cussion at the afternoon session of Friday, December 15th. 7. All resolutions offered must be in writing and shall be referred by the Chairman to the committee on resolutions without debate. The Chairman thereupon introduced Mr. Alfred P. Thorn, Counsel for the Railway Executives' Advisory Committee on Federal Legislation, and General Counsel of the Southern Railway, alluding to him as one of the most conspicuous figures now before the public in connection with the transportation problem. Mr. Thorn then delivered a remarkable address, choosing as his topic "The Government and the Railroads." THE CENTRAL STATES CONFERENCE The Government and the Railways. By Alfred P. Thorn Counsel Railway Executives' Committee on Federal Legislation Mr. Chairman, Mr. Mayor, and gentlemen of the Conference: I think it is a matter of national congratulation that there has been wisdom and initiative enough in the City of Evansville to bring together a conference on this tremendous question. At last the problem of transportation has come out into the sunlight of public consideration and discussion. To my mind it is a most momentous question that confronts the American peo- ple. It is the foundation of their entire commercial and social life. It is the means by which communities and individuals communicate and trade with one another. It is the one thing that is absolutely essential to the greatness and the glory of our nation. I have no doubt from things that have come to me from time to time that the real transportation question is somewhat obscured by the idea that it means questions arising out of the Adamson act. That is a mere incident in the problem. Long before the recent controversy be- tween the employers and the employees of the railroads occurred, the more fundamental questions of the relations of government to the railroads had arisen, and President Wilson in his address to Congress on the 7th of last December, a little more than a year ago, brought this question prominently to the attention of Congress and suggested a comprehensive study of the whole question of transportation in all its relationship, so that, "a new appraisement" in his language, might be had of the twenty- nine years of experience of regulation in this country, so that we might readjust our views in any matter where readjustment was necessary in order to come to a correct solution of this problem. In defining the problem, in ascertaining just what it is that we have to do with, it may be helpful to you, as it has often been helpful to me, to review to a certain extent the history of governmental regula- tion of railroads of America. At the outset of that consideration it is necessary for us to bear in mind the contrast between the systems of regu- lation adopted by the government in respect to other great public insti- tutions and the system of regulation adopted by the government in re- spect to transportation. As an illustration of what I mean, I ask your attention to the dif- ference between governmental regulation as applied to the banking sys- tems of the United States and governmental regulation as applied to the railways of the United States. The system of regulation of banks had its inception when the banks had their inception. It was created as a part of a system which was to create an efficient banking system for all the people of America. It was a part of a great constructive work. It was not adopted in the spirit of an- tagonism to the bank nor in a spirit of criticism, nor in a spirit of outrage coming from abuse; but it came as a natural and constructive part of building up a banking system and possessed all the elements necessary to construct a system which would create adequate commercial banking facilities for the people of this country. The history of regulation as applied to the railsoads is just the con- trary. It was adopted long after the railroads had come into existence. It was not a part of an entire constructive scheme. The railroads had not been built by government. They had not been organized by government. But they came into existence as a result of private enterprise and initia- tive. They were everywhere welcome. Subsidies were voted for them. The most liberal charters were granted. Land grants were given to them, the great fundamental and controlling public purpose being to obtain 10 THE CENTRAL STATES CONFERENCE them as a means of intercommunication between men and communities. None of the possible abuses had then appeared. Every public purpose was concentrated upon the necessity of bringing them into being and of pro- viding the inducements essential to that end. Now, the men that built the railroads were men. They had human instincts and human frailities just as other men had; and the result of the welcome which was thus given, the result of the inducements which were thus offered, the result of the undeveloped public condition of public mind in respect to them was to create the impression upon the men that built those railroads that they were building and were owning a piece of private property. That is not to be wondered at. That was the inevita- ble result of the methods which were adopted and of the encouragement that was given. Soon after this matter of railway transportation passed into another stage. The use of these great properties for private ends, the sale of their ser\aces to the man to whom the sale could be made most advantageously to the owner, on different terms at wholesale to the large dealer than were given at retail to the small dealer, the exploiting of their securities on the markets for the private purposes of the owner, all these things were the natural outgrowth of the conception that these properties were private properties just as other private property was private property. But as time progressed it became apparent that the power of con- trolling transportation was too great in its influence upon the destinies of communities and of men and of nations to be permitted to go uncon- trolled, that the possession of a power so immense that it made and un- made prosperity, that created cities, that made the destinies of nations, should not be left in the hands of their private owners unrestricted by the imposition of the conception of a public obligation. So that on the one side there still was the conception of private property with all the rights of private property and on the other there was a growing conviction that a power so great, with consequences so immense, should not be left in the uncontrolled possession of people that built it. Now, gentlemen, we have all come to see that the public conception of these instrumentalities of commerce was a sound one. We have all come to see that no other conception could be permanently tolerated. But that did not prevent a bitter fight between the men who went into the enterprises with the encouragement and belief that they were private enterprises and the men that were insisting on the public conception of a higher obligation to the whole people. Rebates, whereby one man was favored over another, the affording of facilities to one concern and the denial of them to another, favoring rates to certain communities which were denied to others, all were abuses which could not be permanently tolerated, and the fight for a system of regulation as applied to the railroads was a fight between those men who wished to impose the public conception upon the private owner and the private owner who wished to resent any interference of his supposed rights. The battle went on with fierceness. It was ultimately won, as it was inevitable that it must be won, by the sound public view that a power so immense imposed certain public obligations which must be recognized. But when the question of imposing a system of regulation came, it came with a demand from a people enraged by the denial of just rights, by the existence of far-reaching abuses and the terms imposed were the terms which the victor imposes upon the vanquished. It was terms of regulation dealing with the abuses which had been revealed, and dealing with them alone. The system of regulation was a system which was applicable to the removal of abuses and was one that was characterized by the ideas of correction, of punishment and of repression. That was twenty-nine years ago. The public in making this regula- tion had no help from the railroads, because they went down as the van- quished in the fight. But the thing that we must remember is the Genesis THE CENTRAL STATES CONFERENCE H of the system of regulation and the character which that Genesis neces- sarily gave to the system of regulation. Now, the question before the American people is whether a system of governmental regulation can be permanently based simply upon the principles of repression and correc- tion or whether the time has not come now to inquire whether the prin- ciples of encouragement and helpfulness and constructiveness must be introduced into it. (Applause) I realize that in presenting this question I cannot expect from Con- gress, nor can I expect from the American people, any help to a mere private business. I have no more right in representing the rairoads to ask special privileges of government than any of you gentlemen have to ask special privileges of government in respect to your business. I realize that any proposal I shall make, in any suggestion which I shall bring for- ward, I must consent to have it measured by the public interests, and if it does not come up to that standard, if it does not faithfully measure up to the public interests, then it must be, and it should be, discarded. So that in nothing which I shall say shall I ask for anything on private grounds, but all will be based upon a willingness, at least upon my part, to have my suggestions measured by what the public interests and the public interests alone require. (Applause) Now, gentlemen, let us see what the public interest is. What is public interest in respect to transportation? Is it an interest primarily or prin- cipally in respect to the charges of transportation? Are you, as a funda- mental question, most interested in the charges which you have to pay to the railroads? That is a legitimate public interest, but we must recog- nize that the existing machinery is entirely adequate to prevent exorbitant charges, that there is no demand from any source for amended instru- mentalities by which exorbitant charges shall be guarded against. Your Interstate Commerce Commission has power amply able to deal with any question of exorbitant charges. I say that in passing, but I say moreover that your principal interest is not in regard to charges. Your principal interest is in the existence of means of commercial intercourse, in the entire adequacy of those means to provide for your commercial needs and in the fact that as the commercial and productive industries of this country grow your transportation facilities will grow to keep pace with them. I cannot forget that I was present in the last day of August at a committee meeting in the capitol at Washington, when a threatened strike, nation-wide in its extent, menaced the continuance of railroad transporta- tion in America. I heard no talk of rates; I heard no talk of charges, but I saw the President of the United States and the Congress of the United States busy only with the question of how the wheels of commerce should be kept running and how the American people could be kept supplied with transportation facilities. I suppose that there is no man within the sound of my voice who will deny that if it was necessary in order to continue the instrumentalities of transportation, he would be willing, however reluctant he might be, he would at last make the choice of paying double the amount of charges in order to preserve them. The question with America is not the rate of the charges, but the question of the continuance and adequacy of your com- mercial instrumentalities. Will you permit me to digress and to say that in no move that we are making, in no suggestion that we are bringing forward to Congress, are we trying to get increased charges as a result of congressional action. Our plea to Congress is not that it shall pass a law increasing our charges, but that it shall perfect the instrumentalities of regulation so that when the time comes when charges should be in- creased or should be decreased, the machinery may respond promptly and in a business-like way to the needs of the situation. Is there nothing to alarm the American people about their transpor- tation facilities? Has nothing occurred to arrest their attention? Why, let your mind revert to the year 1907, when in the midst of the greatest 12 THE CENTRAL STATES CONFERENCE commercial movement of the day, there was a sudden panic brought on by the absolute failure of the railroads to be able to transport the com- merce that was offered, not enough tracks, not enough cars, not enough yards, not enough of the instrumentalities of transportation to carry the commerce that was offered it. There was precipitated in that year what is known as a panic of plenty. Last year it was found necessary to set an embargo upon the move- ment of commerce, especially in the New England states, and so great was that necessity that Commissioner Clark of the Interstate Commerce Com- mission went with a number of gentlemen, associated with him, to make a study of the situation so that commerce might move; and notwithstand- ing the effort that he is making that situation has not yet been remedied, because of the fundamental lack of tracks, the fundamental lack of yards, and the fundamental lack of equipment. Just now as I speak, the commercial capacity of America is crippled by the fact that there is a shortage pt cars, an inability to carry the traf- fic. We must recognize that the transportation capacity of these carriers sets a maximum limit upon the productive and commercial capacity of the people, because a people can not and will not produce more than they can get to a market; and when you reduce to them the facilities of access to market, when you set a limit upon what can be sent to market you set the same limit upon what the people can produce. So I shall take it for granted that the prime interest of the American commercial man is to be assured of an adequacy of transportation facili- ties and to be assured that they will always grow to keep pace with the demands of his business, so that an artificial limit shall not be set upon the commercial and productive capacity of America. If I am right in that then I can define an issue which must be accepted by every man that at- tempts to debate this question, and that issue and that definition is this: Those who demand a change in present governmental regulation must justify that demand by showing that such a change is necessary to the continued efficiency of the instrumentalities of commerce in America, up to the public needs at all times. And those who oppose a change must make their appeal to the public judgment on the ground that no change is needed in order to assure the American people an adequacy and a suffi- ciency of transportation facilities. Now, I appeal to you for a moment to pause and see if that is not a fair statement of the issues that ought to be debated in the public interest. Those that demand a change should justi- fy their demand in the public judgment and show that the change is ne- cessary to give to the people transportation facilities that are necessary to their needs. And those who oppose any change must justify their de- mand and their appeal to the public judgment on a proposition that ex- isting conditions do assure to the public an adequate supply of transporta- tion facilities. Fortunately for us in that debate we have facts to which we may point under an unchanged system of regulation. We have the fact which I mentioned a moment ago of a panic which occurred in 1907, because the facilities were not adequate. The fact of the embargoes that were put upon business last spring because the transportation facilities were in- adequate, the fact of the car shortage, which is even now stopping the elevators in the Interstate Commerce building in Washington on account of lack of coal, and the further fact referred to by the President of your Association that in 1916 there was less construction of new railroads in the United States than in any year since 1848, leaving out the years of the Civil War, being less than one thousand miles. There are further facts in our recent history. Those are facts which the men interested in the development of the business of America should bear in mind in consider- ing this question. That new construction, the practical suspension of the building of railways in America, comes at a time when the cost of living is at its highest point. We have heard one political party after another attempt to suggest a solution of this cost of living. You heard one party THE CENTRAL STATES CONFERENCE 13 say that it was due to combinations and they passed the anti-trust laws. You heard another party say that it was due to a high tariff and they passed a low tariff, and you see that the cost of living has mounted stead- ily up, notwithstanding all of their legislation. What, gentlemen, about the old and familiar doctrine of supply and demand? Why not try to in- crease your supply in order to deal with your cost of living? Why not go into the untouched resources of America, to the new fields waiting for the plow and the agriculturalist, to the new mines waiting for the pick of the miner, to the new forests that are waiting for the ax of the lumber- man, in order to bring in your new supplies and put them at the feet of an evergrowing and expanding population? And yet, notwithstanding this rule of supply and demand, notwithstanding that law is the inexorable law of prices, you will find that the railroad construction of this country has been practically suspended and there are no new fields being opened and no new mines and no new forests. Isn't that a fact to attract the at- tention of business men, of all men who are anxious to have a solution of what is a public and a national problem? Is it not remarkable that al- though under a system heretofore existing we have been able to build 260,000 miles of railroad in America, that all of a sudden the desire of the investor has been stopped, his investments have turned in other directions and the expansion of the railroad system throughout the coun- try has been arrested? Now, what is the cause of that? What is the cause of it? You will hear those gentlemen who advocate that no change be made proclaim to you that the cause of all of this has been railroad mismanagement and financial dishonesty on the part of those in charge of the railroads. You will hear a great deal about the Alton case. You will hear a great deal about the Frisco case and the Rock Island case and the New Haven. They will tell you that these railroad men have brought the situation on themselves. Now, the man that makes that argument must be able to provide for your need, for future securities by demonstrating that that is the cause of it. If that is not the cause of it, if he is unable to show that it is the cause of it, he introduces simply the doctrine of hate, the doctrine of public condemnation, the doctrine that there should be pun- ishment; but he has solved no problem of the future . We all know that what has occurred in the Alton case and in the Rock Island case and in these other cases has been ruthlessly exposed by existing methods. We all know that that involves not ten per cent of the railroad mileage in this country. And we all know that in every pro- fession, in banking, in mercantile life, among lawyers, among physicians and I may say among churchmen, there are a certain percentage of men who do go wrong. But we do not abolish commerce, we do not abolish the profession, we do not abolish the churches; we try to do the thing that will make them a more useful instrumentality for the public good. It is a trying thing, gentlemen, to these men who, engaged in the honest purpose of building up and doing something of first importance to the American people, to find themselves at every turn pointed at with a finger of scorn because somebody else has done this or that. If the rail- road management of this country is as a whole dishonest, if they are not to be trusted, then after all these years of purification it has been demon- strated that there is something special in the railroad life to make men dishonest and you will have to do away with it and supplant it by gov- ernment itself. But I stand before you and proclaim as my solemn con- viction that the man, the prevailing type of man in the railroad, is just as honest as the prevailing type of man in any other business and is just as full of purpose to do a good work for the public as any other man. (Applause) Now, these gentlemen say, "Now, here is the explanation of your dif- ficulty." They don't say to remove it will add to your tracks or will add to your cars or will add to your terminals, but let us look for a moment as to that contention. On the one hand there exists these cases which no 14 THE CENTRAL STATES CONFERENCE one will deny and which no one will defend. But let me ask you, one of you gentlemen, to come up here as an investor, and you look on the one side, on all of those abuses that have been talked about, but what do you see besides that? You are asked to invest in a railroad security; what confronts you? The first thing that you see is that your revenues are beyond your own control, that the amount of your revenues is not fixed by your own indus- try, by your own initiative or by your own genius, but they are prescribed and limited by law. That is the first thing you see. Is there anything in that to make you prefer to invest in that business rather than in some business where, by industry and by economy and by genius, you may be able to increase your revenues up to the point commensurate with your work? Here we have an industry where the revenue level is settled, not by you, the investor, not under your control, but under the control of law. Is that an encouraging condition? You find that it is not only controlled by law, but it is controlled by forty-nine different instrumentalities who can have an effect upon your revenues, not by one body with a large, comprehensive view of the whole American field and its needs, but by forty-nine bodies, one federal and forty-eight states, unco-ordinated with different policies, with differing outlooks, with different ideals, all able to put a restriction upon the amount of your earnings. Now, is that a thing that will induce you to believe that a railroad is a first-class investment? But let us turn to the other side. What about your expense account? Can you control your expense account? Why, the big bulk of your expense account is created by labor unions. Your expense account is affected by the requirements of public bodies for investment in non-revenue pro- ducing sources of expense, I mean non-revenue producing additions to your plant. You can be required to build handsome stations. You can be required to separate grades. You can be required to put extra crews upon trains. You can have your expenses made for you. not by your own idea of what your business requires, but by law, and not by the law of one body, with one outlook, but by forty-nine different law making bodies. There, you have your revenue side and your expense side beyond your control, your revenue side beyond your control, and your expense side beyond your control. Now, Mr. Investor, what do you see in that situation to attract you into a railroad investment? But, is that all you see? You see an application made to one of these regulating bodies in one of your states, not far from here, and the commission grants it; and the history of that state is that every time the commission grants an increased rate there is a bill introduced in the legislature of that state to abolish the commission. So that you haven't a fair show, a fair busi- ness show for consideration of the question of whether you ought to have additional revenue. Politics comes in and politics threatens the body that passes on your proposal with being abolished in case it passes on it in favor of increased revenue. But that is not all that occurs. The Interstate Commerce Commission, after long consideration and after a few hearings, increased rates in what is known as the Shreveport rate case, and what was the effect? Two im- portant senators, two men that appeal especially to the progressive senti- ment of America, arose on the Senate floor and denounced the Interstate Commerce Commission for having granted that measure of relief. Now, I will ask this investor again, who can't control either his revenue or his expenses, but who when he makes a case before one of these bodies that does control his revenues, finds that body the subject of attack of a most influential character among the law-making bodies on which that body is dependent. Now, is there anything encouraging in that, to make a man come and put his money into railroads? But, there is another thing to which I would like to call your at- THE CENTRAL STATES CONFERENCE 15 tention as bearing upon the conclusion that will be reached by Mr. In- vestor when confronted by this question. Every man of you who owns a piece of property knows that you cannot borrow the whole value of it on that property, that the desirability of the loan depends upon the margin that is left in value. In other words, there is a recognized line of safety between the amount of borrowed money that a man should get into his business and the amount he should contribute himself. Now, the railroad bond represents money borrowed and represents a fixed charge. The rail- road stock represents money put in by the owner and it does not involve a fixed charge. Now, there is a line of safety as to how much of the capital of a railroad ought to be contributed, ought to be obtained through mort- gages and fixed charges and how much ought to be obtained through stock. Some men say that line of safety is fifty and fifty. Some men say that the railroads can stand a fixed charge of sixty per cent of their in- debtedness, if forty per cent is contributed in the way of stock. I have heard no man say that forty per cent is too little to have coming from the stockholder in order to make the bond a staple investment. Now, what has been the history of railroads in that respect? In 19 00 the amount of railroad capital secured through bonds was a trifle less than fifty per cent. It was forty-nine and a fraction, fifty and a fraction being contributed through stocks. In 1914 the amount contributed through bonds had increased to over sixty-one per cent; and in 1916 it is sup- posed to have increased to sixty-five per cent. So that in the sixteen years since 1900, there has been a growth in the amount that was contributed through fixed charges of one per cent a year, or sixteen per cent, and today the American railways are confronted with the narrow margin of thirty-five per cent only, where the line of safety ought to at least be forty per cent, and some people think sixty per cent. When you ask the investor to invest his money in that he is confronted with this dis- appearing line of safety and, with its recession beyond the point where it is any longer considered a line of safety. But more than that is he confronted with? He is confronted by the fact that he can go into other lines of investment which are not sub- ject to these governmental vicissitudes and get greater security and larger returns which are more attractive to him. So much is that the case that there are whole sections in this coun- try that really contribute little, if any, of their credit to support their transportation systems. Take my own portion of the country, which is the South. Recently we were able, through the income tax returns, to trace the ownership of a block of $100,000,000 of bonds of one of our railroads running through the South, touching the South at every vital point. But three and a half per cent of them were held in the South, ninety-six and one-half per cent, being contributed by the credit of other portions of the country. So that railroad securities are not a favorite at the South and the South gives little of its credit to supply the transportation facilities of the country. The same is true, I am told, in a less degree of the West, that the western people as a rule make their investments in other things than railroads. At one time you could go to Europe, but Europe has re- cently sent back from three to five billions of our securities which have been resold in America and they had to be absorbed here; and after the war Europe will be a borrower instead of a lender. They must build up their own waste places. They will have need not only for all their own capital, but for all that they can borrow. They will not be sending their money here to help build railroads in America. So we have a reduced territory, only a little section of the country which we may denominate the East from which the money has to come to supply North America with its railroad facilities. Now, is there nothing in that to attract your attention as business men, dependent on these railroads for your opportunities of commercial growth? 16 THE CENTRAL STATES CONFERENCE I don't mean, gentlemen, I don't mean that first-class railroad se- curities already on the market do not sell well. They do. But you are not Interested in that. I am not interested in that. What we are interested in Is how is the new money to come, and when we get to the question of new money we must consider the margin of security that is left. We must consider that the line of safety has already been past and there is now no possibility of financing these railroad companies through selling stock and raising the line of safety. Now, gentlemen, it is estimated that in order to make a stock salable at par there must be an earning capacity of six per cent with a surplus of three per cent, to make up for during the lean years. Do you know that measured according to that rule, there are but thirty-nine railroads, having a mileage of 47,363 miles, which could probably be financed by the issue of stock at par? Under this test 137 railroads, having a mileage of about 185,000 miles, could not be financed by the issue of stock at par. Now, that is a railroad problem. We have got to get new money. We are trying to estimate how much new money the railroads will need in the next ten or fifteen years. We can only do that by the past. We see that commerce has grown, that productiveness has grown in America eight and nine per cent a year during that time, for the last twenty years. The railroad facilities at the moment are no more than necessary for what the commerce of the country needs today and if that is to be extended to carry this eight or nine per cent., additional, you must add eight or nine per cent, to them, with the result that there will be needed during the next ten j'ears for railroad construction in America, unless a limit is to be put on your commercial activities, and your productiveness, about $1,250,000,- 000 a year. It will be necessary to refund maturing obligations, some $250,000,000. So that it is no exaggeration to say, unless the productive capacity of America is to be limited, that there ought to be $1,500,000,000 a year spent on these railroads for the next ten years. Now, where is that money coming from? Is it not fair to ask of a system of regulation Avhich limits revenues and does not limit expenses, where that amount of money is to come from? We say it is to come from the introduction into your system of governmental regulation all the qualities of encouragement and helpfulness so that a man will be sure of governmental friendship when he puts his money into this vital enter- prise. (Applause) The experiment that we are willing to make gives to you and yours assurance when you put your new money into these enterprises that you will be confronted by a governmental attitude of cordiality and friendship and not by a governmental attitude of distrust, of detection, of correction and repression. Will you put your money, you gentlemen, you who are the American public, will you put your money in these enterprises unless you are assured of fair governmental treatment of business and not poli- tical treatment? Now, the time for my train is nearly here and I have only a brief opportunity of outlining the suggestions which we think are wise. In the first place we think that commerce has become a national thing in Amer- ica. Eighty-five per cent, of your business, and by that I mean the busi- ness of all the American continent, is interstate business. Ninety-three per cent, of Indiana's business is interstate business. Ought the system of regulation rcognize that fact? Ought it to be the power of any state to break down the instrumentalities of interstate commerce or to deter- mine its standard of usefulness and efficiency? Let me give you an illustration of something that is going on. Here are two states, the states of New Jersey and Pennsylvania, who have adopted what is known by some people as the full-crew law but what is called by the railroad people the extra-crew law. The cost of the law, of complying with that law by the railroads running through those states, is $1,700,000 a year. Those same railroads run through the states of New THE CENTRAL STATES CONFERENCE 17 York, of Ohio, of Indiana, of Illinois, of Maryland, of Delaware, and West Virginia. None of these other states have adopted the policy of the full- crew law. Now, $1,700,000 a year is interest, at five per cent, a year, on a capital fund of $34,000,000. Is there, any more right in New Jersey and Pennsylvania to impose that burden than there is in Indiana and Illi- nois to do it? And yet the commerce of Indiana and Illinois and of Ohio and New York and these other states has to bear the burden of that charge that is put upon their interstate carriers by these two states. If you regard it from the standpoint of a capital fund of thirty-four million dollars which could be applied to the purchase of new equipment and the laying of double tracks and to the establishment of larger yards and terminals, then by the act of those two states a capital fund of thirty- four millions of dollars has been withdrawn not only from their own uses but from the uses of these other states by a policy which these other states have never yet approved in a legislative way. Now, is that a power which should be possessed by any one of the states, to put a burden like that on a sister state? Let us take another illustration. Here is Illinois. Illinois has a law which requires that no railroad shall issue any securities without the ap- proval of its commission and even if it is approved that there shall be a tax of one dollar per thousand to the state of Illinois for that approval. Now, here is the New York Central railroad running from New York through that state and through Ohio and Indiana and into Illinois to a less extent than into any of the other states. In their recent organization they had to go to that body for permission to issue their securities and they gave their permission and they put upon that railroad a charge, a tax of six hundred thousand dollars for doing it. Now, why shouldn't Indiana have put on that charge? Why shouldn't Ohio have done it and New York? They each have more of the property in them than Illinois has in it of that railroad. And if they had done it here would have been a tax charge on the issue of those securities so immense that the issue would have been impossible. Because they did not do it their commerce must help to pay that bill to the state of Illinois. Now, is that right? Is that a helpful principle of law? I have not time to give you an infinite fliumber of illustrations, but I will give you just a few more. Here is Texas. Texas has adopted a system of rates for the purpose of controlling its own market to its own jobber. And here is the state of Louisiana across the way that wants to get into the Texas market, and they find the interstate rates higher than the intra-state rates in Texas and they cannot trade there. Then they have a fight over that proposi- tion. The Interstate Commerce Commission determined that that is un- lawful. A bill is introduced in the senate of the United States to abolish the doctrine of the Interstate Commerce Commission which has been af- firmed by the supreme court and directly a contest arose in the senate over the matter. Texas through its representatives, Louisiana through its representatives, were arguing back and forth and in a little while it was developed that while Louisiana was attempting to get into Texas markets, Natchez, Mississippi, was being held out of Louisiana markets; and Sen- ator Reed of Missouri came into the hearing to protest in the name of St. Louis against the laws of Illinois which sought to build up East St. Louis and sought to exclude St. Louis from Illinois territory. Through Senator Reed came the further complaint from Missouri that Kansas City, Mis- souri, was being excluded from Kansas and Oklahoma in favor of Kansas and Oklahoma, territory, and then from my own section Senator McKellar came up from Memphis and complained that the state of Arkansas was preventing the Memphis merchants from trading in Arkansas. Now, that is another one of the situations. The New York, New Haven & Hartford railroad operating in the New England states, recently proposed an issue of $67,000,000 of bonds to re- fund a number of short term notes, and to provide in addition a fund of 18 THE CENTRAL STATES CONFERENCE $25,000,000 to be used in the purchase of enlarged terminals, more equip- ment and better facilities to be used in public service .The state of Rhode Island gave its approval; the state of Connecticut gave its approval, but when the state of Massachusetts was reached, although its commision approved of what ought to be done, it was found that the laws of Massa- chusetts forbade that issue, so that the proposed improvement could not be carried out, and we see the effect today in the congestion and delays in the handling of traffic which are impeding the commerce of New Eng- land. Now, gentlemen, when we consider what brought about this govern- ment we can see that we are running counter to the whole constitutional purpose of our government by submitting to such a situation as this. After the revolution, when the question of the adoption of a constitution in this country was being considered, it was found that the various states of the Union, through their own inability to control, to pass export laws and im- port laws, were excluding the commerce of their sister states. Virginia, by imposing a big export tax, was keeping her product at home. North Carolina was doing the same. Maryland was doing the same; and New York, by a prohibitory import tax, was preventing the New Jersey peo- ple from trading in the markets of New York, and Connecticut from bring- ing its fire wood there, and Rhode Island, the great port of the country at that time, was paying the whole state government expense by import duty on goods intended for shipment to other states. And there, gentle- men, arose also a great historic question involving this territory. The question was, what should become of the great northwestern territory. There was England on the north anxious to alienate the affections of the settlers in this northwestern territory by close commercial bond with England; and there was Spain on the south attempting to do the same thing. General Washington came forward and said that the only way on earth to hold the affections of these western people was to assure them free trade among the states so that they would not be called upon to pay import duties to the states on the Atlantic coast, but that there should be quality of ports and that there should be free trade so that these people would not be taxed beyond their endurance and their allegiance go to Eng- land on the north or to Spain on the south. So that these facts were the inspiration of the constitution. The states derived immense advantages from the constitution. They acquired immense rights by getting into the Union. Too much effort has been made to talk about the reserved rights of the states. Let us think for a moment of the acquired rights of the states. Did Indiana not obtain a valuable advantage when it obtained the right to have one en- tire and consistent postoffice system? Is that not a state right of Indiana? Did not New York obtain a tremendous right for the state when it ob- tained the right to ask that the whole power of this nation should be Jbrought there to defend it from the invader and to throw him from her shores, and that the defense of each state should be undertaken by the national power? Did each state not acquire a tremendous right when it acquired a right to equality of ports in this country, so that there should not be import duties put upon their commerce that would be burden- some? Did each state not acquire a tremendous right when it acquired the right to a uniform tariff at that time throughout the Union? Side by side with those acquired rights there was placed in the constitution the provision that the national government should regulate and control in- terstate and foreign commerce, and that is a right of the states as valuable as these others I have mentioned and as sacred. So when we appeal for an instrumentality that will be co-extensive with the limits of the nation and with the avenues of commerce, to take a broad and comprehensive view of the needs of all the people, to regulate commerce as en entire thing and according to commercial needs. We are not contending for a denial of state rights, but for an assertion of one of the greatest and most valuable rights of the states. And let me call your attention, gentlemen. THE CENTRAL STATES CONFERENCE 19 to the facts that those who oppose it will not be able to sustain themselves upon any economic or commercial ground, but they must appeal to some political prejudice, a prejudice which has no part in the determination of this business question, and the fact that it is injected, the fact that it is relied upon is one additional deterent circumstance to prevent the in- vestor from being satisfied with his investment. Gentlemen, I find that my time has about expired. Unfortunately for my cause and for my ability to place it before you, there was a limita- tion of time put upon me by the time that I have to go to a meeting at another point. I would be glad to show you all that we propose. In a word we propose that there shall be one comprehensive and wise regulating authority whose powers shall be coextensive with the whole power of interstate commerce and that we shall not be subjected to loose regulation, but that we shall be subjected to consistent, homogeneous and one regulation, a regulation that will recognize the needs of com- merce and in consequence recognize the needs of commercial instrumen- tality. We ask that our securities before they are issued shall be safe- guarded by the approval of the Interstate Commerce Commission, but that when that approval is given we need not have to go to forty-eight or ten other governmental bodies in order to obtain their approval. We ask for one consistent, homogeneous, wise and American system of regu- lation. (Applause.) Prolonged and enthusiastic applause followed the address and a vote of thanks was ordered for Mr. Thorn. With the conclusion of a dis- cussion lasting 15 minutes, during which Mayor Bosse, C. C. Gilbert of Tennessee, R. L. McKellar and E. V. Knight, of Kentucky, were heard, the Conference adjourned until 2 p. m. THURSDAY AFT^ERXOON SESSION. Dec. 14, 1916. After introducing the next speaker, Mr. John Muir, of New York City, President of the Railway Investors' League, the chairman invited Mr. Wilbur Erskine, President of the Evansville Chamber of Commerce, to take the chair. Mr. Muir then spoke on the subject "Investors the Real Railroad Owners." 20 THE CENTRAL STATES CONFERENCE Investors the Real Railroad Owners. John Muir Shows How Public Now Chiefly Owns Lines— Have Remedy If Protected. The first address of the second session of the conference Thursday afternoon was by John Muir, chnirman of the Railway Investors' league. His subject was "The Real Owner of the Railroads — the Investor. Why he is worried over the present situation and how fair treatment will induce him to supply a solution of present American transportation problems." Mr. Muir said: Any discussion on the subject of rail and water transportation or any sound analysis of the present condition of American transportation cannot be complete, cannot secure effective rem- edies without the participation of the real owners of the railroads — the in- vestors. Quietly, but with a steadiness which has accomplished marvelous results, there has been going on, for the past ten years, with cumulative force, the persistent absorption of railway stocks and bonds of the leading railway sys- tems of the' country by the man of mod- erate means, the small investor. Starting with the 1907 panic, known in "Wall street as the "Rich Man's Panic," there has been a steady and rapid increase in the individual num- ber and amount of securities held. The result has been that, whereas in 1901 many leading railroads were owned by a few hundred or at most thousands of investors, now men (and women, too) with moderate amounts of money who were impressed with the oppor- tunity to secure liberal and permanenet income are the chief owners. Coinci- dent with the opportunity, there devel- oped, among financial houses, firms specializing in service to the small in- vestor, firms which studied his needs, catered to his wants, selected with care the security desired, whether a single share of stock or a single hundred dol- lar bond. And what is now the result? Listen to this short array of official figures as to number of stockholders given out by the larger railroad sys- tems: Atchison 1901, 1,300 today, 45,000 Pennsylvania. 1901, 27,000 today, 94,000 C, M. & St. P.1901, 5,000 today, 17,000 Gt. Northern .1901, 1,700 today, 25.000 B. & 1901, 3,200 today, 27.000 Sou. Pacific. 1901, 1.500 today, 33.000 and so on down the list. The New Wall Street And let me state right here a word for Wall street. I have a right to say it, because, first, I am a railroad man of extensive western traffic experi- ence, and, second, because today and for the past twenty years, I have had practical experience in Wall street with the hydra-headed and hard-headed small investor. Wall street has changed very much during the past ten years. Many houses now have thousands of customers, where houses doing a larger business have only hundreds. This is due to the immense detail, the careful painstaking work required, to meet the needs of the small investor. Wall street is no longer a gambler's paradise. It is a section of hard work, devoted to re- search to obtain facts and informa- tion to guide the thrifty, how and what to buy. It is to Wall street earnest minded people come with their savings to buy in small quantities securities representing the best lines of transpor- tation in the country. During this period of increasing pop- ular participation in investment, I have been actively interested in the work, and I know whereof I speak, but my experience previously was distinctly in the railroad field. I think I can pre- sent evidence entitling me to member- ship among the railroad men who help- ed build up the middle and far West. Some Past Experience I am presenting this evidence in order to anticipate the objection which we are all likely to cite when anotiier fac- tor intrudes in a discussion which we have come to consider limited to a cer- tain class of debaters. So please ab- solve me of any charge of egotism when I say that forty years ago I was general freight agent of the Kansas Pacific railway, the only trunk line of Kansas running from the Missouri river to the Rocky mountains. I saw Kan- sas emerge from her scourging by grasshoppers and drought to a state of continuous rich crops and plenty. Thence I went to the great Northwest Pacific coast, ^vhere existed a compli- cated transportation system of river, rail, ocean and sound. I transformed the measurement basis of transporta- tion charge to that of weight. The rate on a horse, for instance, was reached by measuring from the tip of his nose to the end of his tail (we didn't allow THE CENTRAL STATES CONFERENCE 21 or cropped tails) and charged on the lasis of 40 cubic feet per ton of space ccupied. On the completion of the Northern Pacific railroad, I became raffic manager of the new transconti- lental line, which revolutionized the aaking of through rates to the Pacific oast. All of that great development I aw; part of it I was. Later, thirty 'ears ago, I became traffic manager of he Chesapeake & Ohio railroad, now ,0 ably represented by our friend, Mr. ^rank Trumbull. In the recent history of railroading Lnd in the present discussion on rail- way development, the great army of nvestors in railway securities have not aken a prominent part. They have aken hardly any part, but on the basis »f a practical railroad experience and )n the basis of a practical investment jxperience, I believe it is in approach- ng present problems from the stand- joint of the investor that we are most ikely to reach a proper solution. Throughout the country there is a rreat army of investors ready to sup- >ly money for the railroad development vhich the country so badly needs. If ;hese investors can be convinced that ;apital invested in the railroads will be jiven proper consideration in the solv- ng of all problems, that most pressing problem, the raising of the great imount of money needed for new con- struction and development, can be eas- ly solved. Now let me get down to the present status of this matter. The Present Conflict There is at present a conflict raging between two elements in the railroad transportation business. -; On one side, are the directors and ex- ecutives of the railroads. On the other side, are the four brotherhoods of en- gineers, firemen, conductors and train- men. The brotherhoods, 400,000 strong, united and alert, say with one voice, "We must have more pay or shorter hours or both or we'll strike." The executives answer, "With our restricted rates and higher cost of operation, we cannot grant your request." A dead- lock occurs, the matter is appealed to the president and he, to avert a calam- ity, promises to grant, through con- gress, what the roads deny. The investors, 600,000 strong, the real owners of the propei'ties, scattered all over this country, having an immense power vested in them, unorganized, are unable to come forward with the com- bined voice of even a paltry dozen. They are uneasy. They chafe. They hesitate. They ask the question, "How about future investments in railroads torn by dissensions between execu- tives and employes?" They finally evolve this thought: The executives of the road represent us and, in the main, do it satisfactor- ily; but, owing to the fact that there is a prejudice against them in congress, in the commissions, and in the mind of the public, they can't, in their official capacity, exert as much influence in certain fields as we could if we should act for ourselves independently. Let us get together and let us, the owners of the roads, show to congress and the commissions that political influence and voting power are not wholly con- fined to shippers and the four brother- hoods. The investors, in addition to thinking in this manner as to the attitude exist- ing between their railroad executives and the brotherhoods, evolve another thought, as follows: We are the real owners of the rail- roads. It is our money which is in- vested, therefore, you, the brotherhoods, are our employes. Now what is the matter? We are 600,000 strong; you are 400,000 strong. Tou are organized; we are not. You have put one over on us, because you are organized, but it Is unfair. It won't stand the test. Let us talk over our grievances. You have yours. We have ours. We can't pay what you demand unless we are helped. Instead of snarling and quarreling with your executives, let us together find the solution of the matter and, when we get what we ought to have (and we ask you to help us get it), you may be sure that we in turn will allow you what you must see under this high cost of operation we cannot grant. At Cross Purposes Now, gentlemen, you must see. In the present condition of this conflict between the railroads and their em- ployes, that they are working at cross purposes. The great army of railroad brother- hoods have been forehanded. Upon small contributions from their wages and with skilful and astute leadership, they have built up a power and force which have enabled them to go before the highest authority in the land and demand and obtain a promise of in- creased pay upon threat, if not granted, of closing up the traffic of the country. These 400,000 employes of 600,000 in- vestment owners, of our ?20, 000,000, 000 national transportation system, did this. Kow did they get away with it? Was it because their numerical strength made them politically formidable? Is this big free country to be coerced by such tactics? And right here, is it not logical to ask if the brotherhoods can by this threat obtain higher wages why can 22 THE CENTRAL STATES CONFERENCE they not by similar threat more simply solve this problem and obtain for their employers, the railroad, higher rates to enable them to pay higher wages? "It is well to have a giant's strength, but it is tyrannous to use it as a giant." Now I submit that the brotherhoods, in taking the course which they did, committed a great mistake. If an em- ploye of mine comes into my office with pistol in hand and says to me, "Mr. Muir, I want you to raise my pay. If you don't, I will blow your head off," I tell him at once to clear out. But if he comes to me and says, "You are making money. My pay is not enough under this increased cost of living. Will you not raise it?" I immediately rea- son with him and devise ways and means to satisfy him. This course of the brotherhoods will not stand the test. The railroads, un- der present conditions, cannot stand for the demand of the brotherhoods and continue successful operation. If the brotherhoods had used the same influ- ence and force with the same author- ity in Washington in presenting the needs of the railroads and gained for their employers what they think they have secured for themselves, the rail- roads would today be able to meet their demands. The Real Owners And where in this controversy stand the 600,000 railway investors, who em- body the great force that lies latent in the owners of the railroad property? Nobody ever hears a peep from them, and congress and the commissions sim- ply ignore them as if they were a neg- ligible quantity. That is not the way to carry on an effective campaign. Why shouldn't they appear by means of their own chosen representatives, be- fore the Newlands commission or what- ever body may finally be appointed to crystallize conclusions on this all im- portant problem? Why shouldn't they, as an organized and politically formid- able body, bring their influence to bear on the press and on the public? Of course, their representatives in the per- sons of presidents, legal counsel, etc., appear and speak for them, but we all know very well that isn't the same thing, because the public prejudice is against the managers of railroads, not against the stockholders who own them. It is of supreme importance that the owners should be satisfied, because it is they who furnish the funds to develop the sections of country not now proper- ly supplied with transportation facili- ties. It is the owners that congress and the commissions ought to hear from, and the owners are as dumb as oysters and as powerless as jellyfish with no solidarity or means of expres- sion. And now the Saturday Evening Post says, "In the face of a billion net last year, railroad managers and investors in railroad securities are wondering what the situation will be after the boom, if public regulation of railroads is applied in as narrow and jealous a spirit as it was for some years before the war. Individual shippers may ap- plaud when a particular rate they are interested in is ■ cut down. Farmers here and there may be fooled into think- ing that the lowest possible freight rate which does not throw the carriers into actual bankruptcy is to their interest. But it is very certain that, for the coun- try at large, regulation in that haggling, oppressive spirit d,oes not pay." I quote from the bible when I say, "Beware of the withholding which lead- eth to poverty." You have no doubt seen that the pres- ent condition of the railroads has been likened to a man suffering from hard- ening of the arteries. This is a striking simile, but I cannot fully subscribe to it. Hardening of the arteries means age, decay and approaching dissolution. This is not the case with this countrj'. We are young, vigorous and have plenty of rich virgin sections yet to open and cultivate. But we are ham- pered and hemmed in by the wants of this growing nation. We need blood to pulsate through these arteries. The thousands and tens of thousands oi small investors stand ready to furnish the means to inject blood in the shape of rails, ties, rolling stock, terminal fa- cilities, to develop these new fields. But they hesitate and fight shy of new propositions where, by the lessons of last summer, they see that their em- ployes' demands are satisfied and taken out of the earnings of the railroads by the government and their own rights for proper compensation are ignored. Purpose of the League Now, the Railway Investors' league has been organized to consolidate, for protective action, that immense power and influence possessed, but heretofore unused, by hundreds of thousands of unorganized investors. The league is neither anti-labor nor political. Its aim is to secure fair play alike from railroad managers, railroad workers, railroad regulatory bodies and political parties. It will oppose unfair tactics, whether attempted by federal or state government bodies, by railroad managements or railroad employes. It is "anti" nothing — save unjust prac- tices from above or below, from with- out or within. This is the Railway Investors' league THE CENTRAL STATES CONFERENCE 23 which is now growing like a young giant and to which we want every man or woman who owns one share of stock or one thousand, one hundred dollar bonds or thousands, to belong and to support this immense power for fair play — fair play for owners and em- ployes, for shippers, for the public and for the country. Mr. Paul Mack Whelan, the secretary of the league, is here. He will furnish the platform of the league, and, if you are in sympathy and accord with its object and purpose, enroll yourself now. More especially do I invite co-operation and enrollment from the members of the brotherhoods. There is not one idea or sentiment in the Railway In- vestors' league incompatible with the brotherhoods' desire to obtain fair play from their corporations and for their corporations. Instead of being 400,000 and 600,000, let us make it a million, combined to assert, maintain and de- fend our rights. Brothers of the brotherhoods, are you with us? If so, come forward now and act jointly with us. After the applause had subsided and the thanks of the delegates and visitors had been voted Mr. Muir, Chairman Erskine introduced Lansing H. Beach, of Cincinnati, Ohio, Colonel U. S. A. Corps of Engineers, as one of the most competent authorities on river and harbor improvement. Col. Beach then addressed the Conference on the subject: "The Improvement of the Ohio River." 24 THE CENTRAL STATES CONFERENCE The Improvement of the Ohio River. By Lansing H, Beach, Colonel U. S. A. Corps of Engineers. It may seem a little superfluous to describe the Ohio river to the people of Evansville and those who live upon its banks, but as many peo- ple of the Conference are not from the shores of the Ohio, a few state- ments covering the characteristics of that stream may not be amiss. It drains a territory of about 204,000 square miles in extent, derived from fourteen states, either wholly or in part. It is formed by the junc- tion of the Allegheny and Monongahela rivers at Pittsburgh. It has a course of about 968 miles to its mouth at Cairo. In the upper portion of the stream the slope is quite steep, about seventeen inches to the mile. This is gradually decreased as it gets down the river to about eleven inches a mile. The water flow in the Ohio is not uniform. They have a surplus fre- quently, decidedly more than enough in the early spring or late winter, and in the fall months the river becomes so low that above Cincinnati there is sometimes a navigable depth of only a foot and a half, practically no navigation at all, and from Cincinnati down they frequently have no more than two and a half feet. It was to remedy this condition that the improvement of the Ohio was started. Now, the improvement of the Ohio wa's like Topsy. It wasn't born, it simply grew. It commenced in 182 7 and from that time until the late seventies efforts to secure a channel were confined to dredging or to construction of dikes which would throw the water upon the most obstructive sandbars and wash them out. This, however, proved unsatisfactory, especially for the movement of coal, which formed the largest commodity transported over the river. Conse- quently in 1875 the first dam was constructed at Pittsburgh. This, how- ever, did not originate in the desire to make a deep channel throughout the river. It was simply formed for the purpose of creating a harbor at Pittsburgh so that the coal fleets could be made up at that locality and be able to start down the river on the front of the rise and consequently onto the lower river and the Mississippi. Formerly the coal was kept in the pools of the Monongahela river and had to be brought out in the Ohio after the high water had come. Eleven feet was about the depth that was needed in order to let the coal boats pass down safely. It was fre- quently found that the small rise would be lost. The water would run out before the coal fleets could be made up and started down river. Con- sequently it was believed advantageous to build dam No. 1, as it was then called, the Davis Island dam, about nine miles below Pittsburgh, so that these fleets could be made up and be ready to start on the rise. This, however, was found so advantageous that it was considered advisable to build some lower down and the improvement was so marked and the ef- fects so beneficial that Congress, in 1910, decided that it would be a good plan to build locks and dams throughout the river. Now, these dams differ from those ordinarily constructed in most streams, in that they are what are called movable dams. That is, they can be raised when the river is low, but put down, lying on the bottom of the river when the depth is sufficient for boats to pass over them in the ordinary river channel. The effect of a lot of fixed dams, as they are called, would not be advantageous on the Ohio for the reason that the traffic would have to pass through the locks at all times. As the number of locks from Pittsburgh to Cairo will be 54 when all are completed, it can easily be seen that this would ue quite a handicap on through navi- gation. The result of a fixed dam was also greatly feared on the upper Ohio for the reason that it was believed that it would increase flood THE CENTRAL STATES CONFERENCE 25 heights, and that was the reason why consent was given for movable dams as well as the advantage to navigation. Now, the pictures which will be shown on the screen will describe better than I could tell you just what the work is. Moving pictures of the Ohio river and dams were then shown on the screen. Following Col. Beach's address and the moving pictures, a vote of thanks was oi-dered and a motion made and unanimously passed, "That it shall be the sense of this meeting that the legitimate improvements of the Ohio river, as outlined and illustrated by Col. Beach, shall not be con- sidered in any sense, what has so often been termed, a 'pork measure.' " Chairman Murphy resumed the chair and announced the appointment of the following to constitute the Resolutions Committee: Hon. Benjamin Bosse, Evansville, Ind., Chairman; David Hirsh, Louisville, Ky. ; J. R. A. Hobson, Evansville, Ind.; George H. Evans, In- dianapolis, Ind.; Samuel L. Orr, Evansville, Ind.; Marcus A. Sonntag, Evansville, Ind.; R. L. McKellar, Louisville, Ky. ; E. Vernon Knight, New Albany, Ind.; J. L. Bayard, Vincennes, Ind.; Frank Ellison, Cincinnati, O.; Phelps Darby, Evansville, Ind. At this moment the Chairman was handed a telegram, which he read to the audience: "Henry C. Murphy, Chairman, Central States Conference on Rail and Water Transportation, Evansville, Indiana. "May I not send my greetings to the Central States Transportation Conference and express my deep interest in the great questions it has as- sembled to discuss. I wish that I might have the benefit of hearing those discussions. WOODROW WILSON." The Chairman then read a telegram from John E. Lathrop, of New York, who wired from Omaha his regret at being unable to reach Evans- ville to personally address the Conference. Mr. Murphy thereupon intro- duced Mr. J. C. Johnson, requesting that he read Mr. Lathrop's speech. Mr. Johnson then read the following from Mr. Lathrop on the subject: "Car Shortage and the Cost of Living." 26 THE CENTRAL STATES CONFERENCE Car Shortage and the Cost of Living. By John E. Lathrop, Director, City Planning Department, American City Bureau of New York; And Secretiiry, Indiana City Planning Committee. The high cost of living takes its rise from two cognate causes: That which is purely economic and which Is more or less from human faults and imperfections. That which arises from defects in physical processes. Our entire fabric of business, industrial and financial activities is divisible into two functions: Production. Distribution. I refer, of course, to the physical process of distribution, rather than the economic distribution of wealth. Important economies have been introduced in the function of pro- duction. The principle has been recognized generally. All who engage in the performance of the productive function will be forced at once to reach the new standard, if they have not already done so. I have confidence in American brains, energy and patriotism to believe that, in respect of our productive processes, we shall attain a level of economy as high as that which has been achieved by any nation under the sun. However, in the physical distribution of products, we Americans have woefully fallen down. Our distributive system is wasteful in the extreme. It is so wasteful that, in my opinion, the question of railroad rates is not so important as another, service, which I purpose to raise herein. I am not unmindful of the necessities which have been laid upon this republic to 'regulate rates, but at the same time I remember that the In- terstate Commerce Law invests the Interstate Commerce Commission with authority to regulate "rates and practices," and I believe that, before our transportation problems are solved, we shall have to give vastly more at- tention to "practices"; and that, as a people, we must take official cogni- zance of still another thing, equipment and plant, to a greater extent than we have in the past. Delays in the shipment of goods and products are today the night- mare of this nation. This nocturnal steed troubles the slumbers of every business man, punctuates his every-day conversation, in every locality. We refer to this difficulty as "car shortage." My thesis is to show that it is not actually car shortage, but the non-use of that which would be an abundant supply of equipment, if we had adequate systems of rail terminals and water routes and terminals. This so-called car shortage is not new, although aggravated beyond most previous experiences of a similar nature. During fifteen years, in which I have closely followed the proceedings before the Interstate Com- merce Commission, I have noted these gluts of freight with recurring regu- larity. Every time an extra burden is laid on our transportation system, the machine breaks down. Speaking in the language of the engineer, our transportation system in this country is carrying the peak load practically all the time. It has become the rule among business men to expect the aforesaid delays in the shipment of goods and products. All contracts are figured at a higher price level to take care of the cost and wa.»ite of such delays. So that the tendency is to estimate all processes, commercial and indus- trial, on that higher price level. It has been interwoven as an essential factor into the business activities of the country. THE CENTRAL STATES CONFERENCE 27 Herein do we find a major, if not the major, cause of the high cost of living; and this enormous waste caused by these delays is on account of the inadequacy of our terminal systems. In the United States we have approximately three million freight cars of all classes. The average movement per car per twenty-four hour day on the Pennsylvania Railway for the last year was 23.6 miles, or slightly less than one mile an hour. (I am so informed in a letter to me from Mr. Shafer, Superintendent of Transportation on the Pennsylvania lines.) The average for the whole country of movement per car per twenty-four hour day is about seventeen miles. Now, freight trains move up to seventeen miles an hour. An aver- age freight train movement of twelve miles an hour would give us 288 miles per 24-hour day. Of course, no one expects such an average move- ment per car per 24-hour day as 288 miles. But, if the average movement per car on all roads is only seventeen twenty-fourths of a mile an hour, and under a mile an hour on one of the most efficiently managed railway system of the country, obviously there is a serious discrepancy somewhere. I find it in the terminal system — in the deplorable inadequacy of ter- minal facilities to permit the movement of freight at a higher average rate of distance per day. Recently I made a shipment from Fort Wayne to Evansville. It moved, from the time I offered it in Fort Wayne to the time it was de- livered to me in Evansville, an average of one and one-half miles an hour. This was true, notwithstanding every official of the Pennsylvania Railroad and the Chicago & Eastern Illinois Railroad most courteously pounded that shipment on the back and by telegraphing and telephoning made of it relatively a race horse. Transportation for me began when I offered the shipment at the rail- way platform; it ended when the stuff was offered me again in Evansville for loading on a truck, and it has been hauled through the streets to the building which was my terminus. What was the trouble? The freight trains on the Pennsylvania and the Chicago & Eastern Illinois moved, as I say, up to seventeen miles an hour; yet the average movement for me on the total transaction was one and one-half miles an hour. I traced the history of that shipment. It was four days getting out of the Fort Wayne terminal on account of a glut. It had to pass through Columbia City and Terre Haute and into the terminal at Evansville, at which point it arrived a day before it was available for unloading. I am not complaining, but on the other hand am acknowledging the courtesies of the railway men who exerted themselves to extricate me from my difficulty. But there should have been no difficulty. Furthermore, my difficulty arose not from car shortage, but from terminal facility shortage; and that is the crux of this whole situation. Shortly ago, the owner of a mine in a town a few miles west of Evans- ville had a shipment of machinery coming from Pittsburgh. He needed it desperately. He sent a man to Pittsburgh personally to accompany and actually ride in the freight car. This he did, inducing the train and yard crews to hurry up that shipment — probably using up one or two boxes of cigars (I hope for the sake of the railway men, they were good ones), and he arrived in Evansville, believing his troubles were at an end. He boarded a passenger train and went to his home town. Four days later, instead of one day later, the car reached his mine, in the meantime, it had been flooded. It cost him fifteen thousand dol- lars of actual damage, plus the loss of production, pending repairs and pumping out. Last June, I rode from Altoona to Harrisburg, Pennsylvania, on the rear end of one of the express trains. There was a solid line of loaded 28 THE CENTRAL STATES CONFERENCE cars to move East, which were not moving. These cars extended from station to station, practically all the way. What was the matter? Car shortage? Certainly not. These cars could not be gotten through the terminal at Harrisburg. You talk of car shortage? Assume that the F'iennsylvania Railroad had placed a mil- lion additional cars on the tracks this side of Altoona. Would that have helped to get these glutted cars through the Harrisburg terminal? Of course, it would not. It was terminal facility shortage. It is terminal facility improvements that is needed to stop this low potency use of railway equipment. Here are two or three million freight cars moving less than a mile an hour, on the average, on one of the best managed railroads of the United States. Were there adequate terminal facilities, could we not, by increasing the movement per car per hour for the whole mass of equipment, make say, three million cars do the work of vastly more cars? Suppose we attained an average movement per car per 24-hour day of forty-eight miles, or two miles an hour. Would not that more than double the movement of freight; or be tantamount to putting five to six million car movements into operation instead of two or three million? I am conscious of the fact that there are other elements entering into the situation. The prevalency of demurrage rates on detained cars in freight yards is proof evident that one factor is the sometimes tardy un- loading or loading of cars offered by the railway company, but I am sure that this factor compared with terminal facility shortage is negligible. However, in passing, let me say that I believe that demurrage rules should not be less severe, but that they should be rather stiff to take care of that element of sometimes negligence; or at least to spur to highest endeavor to unload freighted cars or load empties when offered in response to demand therefor. I am informed that lately ten thousand cars of wheat stood on the Chicago tracks, not unloaded, because there were not facilities to handle them; practically nine million bushels of wheat which were in cars Avhich were being used as warehouses, when there should be facilities to handle them and the cars be offered again for traffic. All the time after a brief period, these cars were paying a demurrage rate of five dollars a day and the cost was being marked up against the sacks of flour that were be- ing sold. I wish to revert momentarily to answer a possible objection that con- ditions are now unusual; they are unusual only that the trouble is slightly aggravated. In principle, this condition has been present in marked de- gree, as we all know, with frequency for many years past. During a total travel of three hundred thousand miles during the last twenty years, most of it in this country, I have noted these conditions in all parts of the United States. Have I any technical authority for the bur- den of my thesis? James J. Hill six years ago said, "The United States should invest annually a billion dollars in terminals. Were this to be done for ten years, at the end of that period we should find that repressed and new traffic would have absorbed the added facilities and we should again have serious congestion." But Mr. Hill said another and most striking thing: "I can haul a ton of freight three hundred miles cheaper than I can pass it tiirough the average city terminal." Let us take the whole fabric of transportation between Chicago and New York, approximately nine hundred miles, or three units of three hundred miles haulage each. There are about eight major terminals be- tween these two metropolises, or ten in all, with the originating and des- tination terminals. Make an equation on the basis of Mr. Hill's phil- osophy: I THE CENTRAL STATES CONFERENCE 29 Thirteen, or the Chicago-New Yorlc fabric of transportation, equals three units of actual haulage, plus ten units of terminal operations. I submit that this equation indicates essentially the largest problem that relates to car shortage and the high cost of living. In Washington, D. C, I personally organized an investigation into the cost at the kitchen door of thirty food products from the Potomac Valley, compared with the prices paid the farmers and fruit men at the wharf. These articles in no case advanced less than three hundred per cent, in many cases advanced a thousand per cent, and in some as high as eighteen hundred per cent. I realize that there were many factors in this enormous advance from the point of ultimate production to the point of ultimate distribution; that the prices in one city affect the prices in another, and that all tend to take the highest price level of the largest city; but I cite the Wash- ington case chiefly to call attention to the crudities of the facilities in Washington, which are typical of the American standard of co-ordinating of land and water facilities. Washington prices were largely a reflection of the very high prices of New York, and the crude water and land termi- nal facilities at Washington unfortunately are a reflection of the crude facilities of like nature across the continent. That brings me at least to a mention of something which cannot be ignored in this thesis. We are in the third phase of the development of our transportation processes. In the first we had rivers and canals; in the second railroad development with a confessed hostility to water carrying by the railroad men, and indifference, unfortunately, by the peo- ple as a whole. This third phase, which we are now entering, must be the co-ordination of rail and water facilities. The cool truth is that Ave have not been able and shall not be able to move our tonnage on rail to the practically total exclusion of inland water- ways. We shall have to develop our inland waterway system, as much for the relief of the railways as for the economic benefit to the nation. I have always held to that school of transportation economists which believed that the railways were short-sighted in opposing the develop- ment of inland water routes. I insist that, with the slower moving and low price freight handled as much as possible on the waterways, the rail- roads, thus relieved for many of the low price hauls, could utilize their investment to carry the higher priced freight to their financial better- ment. However, the railroads now favor the development of inland water routes. I believe we shall have to adopt the system employed in Germany, where about thirty per cent, of their tonnage moves on canals or canalized rivers; but wherever water facilities are developed, there is always present the most perfect engineering device for the trans-shipment from water to rail or rail to water. We must use this as our model. Along the great Ohio valley, must move a vast water tonnage, and at Evansville, St. Louis, Louisville, and Cincinnati must be developed the absolutely best engineering devices for trans-shipment. All this will call for enormous additional investments. The way has been paved for part of this added investment by the introduction of economies in the operation of railroads. When a few years ago Louis D. Brandies of Bos- ton, now a justice of the United States Supreme Court, asserted that the railroads were wasting a million dollars a day, which could be saved by economies without increasing rates, the railroad interests scoffed. The other day a representative of the railway executives' organiza- tion specifically admitted that Mr. Brandies had been quite accurate in his estimate, and that since the Brandies allegation was made, the rail- roads had effected operating economies of about a million dollars a day. I do not pretend to estimate even vaguely what this added invest- 30 THE CENTRAL STATES CONFERENCE ment must be, but it is safe to predict from the statements of James J. Hill and other great transportation scientists that it will run into the bil- lions. Where shall we get these additional billions? "^'hy should we not all frankly face the facts? I apprehend that not a dozen men within the sound of my voice question in their inmost hearts that the ultimate solu- tion is going to be government ownership. I honestly believe that even those who oppose government ownership as a policy in most cases admit that it is coming. If this be true, why should we not as a people have the moral cour- age to face the facts? Of course, it is a colossal problem, and the easy way is to push it from us into the far future; but is it not the part of wisdom frankly to address ourselves to the facts, rather than to adopt the weak policy of pretending something which we know is not true? The intensive development of our internal processes is in its infancy. Potential agricultural productivity is certainly not more than fifty per cent developed. Imagine the processes of the older European countries ap- plied to our husbandry, and an annual form and livestock production of eleven billions increased to twenty-two billions; our coal, gas and oil mo- tive power supplemented by the utilization of our vast, but practically un- used, water powers; our population increased as it is increasing, «nd try to picture the colossal task of moving all the freight on rail. Gentlemen, it would be to attempt the impossible. Money could not be poured from a horn of plenty into which had been dumped the wealth of a thousand Golconda mines fast enough to meet the immediately press- ing demands for transportation facilities and give even a little attention to future needs, without the most extensive use of all possible inland water routes. A lot of buncombe has been talked about the pork barrel. I have seen a good many rivers and harbors appropriation bills in the process of the making, and I freely admit that a lot of Mud Creeks have been recognized which are not more than deep enough to provide Johnnie with a swimming hole: but, on the other hand, -no one, with a glimmer of reason or the slightest conception of the transportation situation of this country, will question that we must hurry to develop our inland water routes and co-ordinate them with our rail systems. The great units in the water system will be the Ohio River, the Mississippi River, the Missouri River, the Great Lakes with its co-ordinate New York Barge Canal, the Inter-coastal water route along the Atlantic water front, and the Columbia River Basin. As we work out this vast system, we must study the co-ordination of rail and water facilities, and we must end the era in which, in the dis- cussion of rates and transportation practices, the rail transportation sj-s- tem appears before the courts as an opponent of, or enemy of, the water system. The two must be regarded as essential parts of the whole. These, gentlemen, are, in my opinion, the most deeply fundamental questions with relation to car shortage and the cost of living. Humanity Is prone to superficial processes. We are at this time more or less super- ficial in our discussion of the best means to combat the high cost of liv- ing. We see some surface symptom and treat it, rather than to go co the fundamental cause of the disease. These superficial treatments are not without their values, because we cannot always wait to work out our fundamental ultimates, but we shall have to go deeper and attack the real issue. And in doing so, we must rise to a level of real patriotism. Every class, the railroad man, the shipper, the consumer, the laboring man, the official must step up to that higher altitude of consideration for the good of the whole mass which we have not yet attained to the necessary de- gree. When this spirit shall have taken possession of us and we rise su- THE CENTRAL STATES CONFERENCE 31 perior to the pettier, littler selfish motives which lead us into foolish class antagonisms, we shall perhaps — will you pardon me for just a touch of sentiment? — we shall perhaps discover the practical beauty in these lines of the poet, Sam Foss: Let me live in my house by the side of the road, Where the race of men go by. They are good, they are bad. They are weak, they are strong. Wise, foolish; so am I. So why should I sit in the scorner's seat. Or hurl the cynic's ban? Let me live in my house by the side of the road. And be a friend of man. THURSDAY EVTENING SESSION. December 14th, 1916. Chairman Murphy called the meeting to order at 8:30 o'clock p. m. Ladies and gentlemen : We will resume our deliberations accord- ing to our program. Up to this hour we have had transportation dis- cussed from the angle of the railways, the first address being the monu- mental effort of Mr. Alfred P. Thom. The next phase was the discussion of the subject from the angle of the investors, as represented by Mr. John Muir, who made an equally remarkable presentation of the case of the man who puts up the capital. Third, we had the neutral viewpoint pre- sented by Mr. John E. Lathrop. Tonight we are going to have the oppor- tunity of hearing from a man who presents the side of the fellow that pays the bills, the shipper's side. We are fortunate, indeed, in having with us so able a representative of the great shippers' interests. When I was seeking a man to fill this place I wired Colonel George Pope, of the National Manufacturers Association, and asked him if he couldn't come to talk for the shippers and the big manufacturers. He replied that en- gagements in New York prohibited his attendance. Thereupon I wired for suggestions and immediately the reply came back, "Get E. B. L^gh and J. M. Belleville." Through fortuitous circumstances we have tffeen able to secure both of these men. We are indeed lucky in having these men here, because the shippers of this country have no abler representa- tives than they. We have alloted them plenty of time for the discussion of the subject. Mr. E. B. Leigh, of Chicago, a director in the National Association of Manufacturers, and Vice-President of the Railways Business Associa- tion, will talk to us on the subject, "The Shippers, Their True Relation to the Transportation Problem." There is no man in the country who can better define the interests of the shippers than Mr. Leigh. I have the pleasure of introducing Mr. Leigh to this audience. (Ap- plause.) 32 THE CENTRAL STATES CONFERENCE The Shippers, Their True Relation to the Trans- portation Problem. By Mr. E. B. Leigh. Having been invited to speak from the standpoint of "The Shippers." it may not be out of place to say that, owing to the inability of Col. George Pope, president of the National Associ- ation of Manufacturers, to be present, our esteemed chairman. Col. Murphy, generously accepted Col. Pope's sug- gestion of my name as a substitute for his own, and as a director of that as- sociation. In like manner, and because of the necessary absence of Mr. George A. Post, president of the Railway Bus- iness association, I am responding to the call of that association as one of its vice-presidents — thus appearing in somewhat dual capacity. The direct business with which I am identified is such that it is allied with both of these associations. As criticism, or question may arise as to the unbiased view^ point of a company selling its products to railways, I trust you will permit me to say that 70 per cent of my company's business is en- tirely removed from railway contact — but 30 per cent having such contact. These conditions being explained to Col. Murphy, he requested that the cause of the shipper be presented on broad lines. In^this effort, there may be some ad- vantage in having two angles, or view points, each of which may be tested by its effect upon the other — the two- fold relation thus perhaps serving to induce a broader and fairer consider- ation of the question involved. What is the interest of the shipper in the railway problem? This question, when asked, may elicit many answers, the most com- mon of which would doubtless be: "low freight rates." This is the most pop- ular conception of the primary inter- est of the shipper in the railways of the country; yet upon analysis it i? found that every industry, every com- mercial enterprise, and every individ- ual is interested not only in the rail- ways as such, but in their effective and profitable operation as well. This universal dependence varies, however, in directness, in form, and in the consciousness of the individual. The products of the farm would be of relatively small value, minus the facilities of transportation to markets of sale and consumption. The pro- duction of the infinite variety of com- modities, essential to the maintenance of our present day civilization, is made possible by the railways. The daily necessities and luxuries of life come to us, as individuals, so almost automatically as to warrant the ex- pression, "as free as the air we breathe"; yet we have to look back but a little to see that the railway is the handmaiden of us all. So when we speak of the "shipper," we naturally ask who is the shipper: what is he; and why? The answer seems obvious; he is every one of us — that is, in the sense that every one of us is an interested party, when the railways of the country are under consideration. But referring to the shipper, as he is commonly conceived in our business life: How often have we heard our great manufacturers speak of the two fund- amental divisions of industry as con- sisting of making and selling goods: and of further likening them to th' two sound legs upon which every healthy man must stand. The anal- ogy is apt, so far as it goes, that is, if the man has merely to stand. Just so with the great furnace, the great mill, or warehouses — if their functions are complete with the goods piled be- fore their doors. But the strong man's limbs will surely atrophy if he has no road to travel; just as all manu- facture will stagnate without the means of highly diversified distribu- tion of its products. Thus there is a third fundamental element in all industry and commerce, appearing at the threshold of any producing enterprise, and again when the product has been sold, and is ready for distribution — transportation; a third partner — not within our corpor- ate organization, but one vitally es- sential to it. How shall we treat him? We are extremely careful in the sel- ection of our corporate officials. We seek men of the highest order of abil- ity to evolve and conduct our manu- facturing processes; we seek men of judgment, foresight, discretion and tact to outline and execute our com- mercial policies — to sell our product. THE CENTRAL STATES CONFERENCE 33 ^nd as we logically regard both as imong our most valuable assets, we :onserve their health and strength, and stimulate their activity by liberal compensation. We do these things, not from philan- thropic motives; but from the sound- est of all business reasons — because t pays.. Now, if all industry and commerce rest upon this triangular base of mak- ng, selling and distributing; why should we jealously guard the sustain- ng power of the two legs of the tri- pod, and imperil the equilibrium of the mtire structure by a gross indiffer- ince to the third. Perhaps it may be said of this ex- ;ernal partner that he is not one of is; that he is a third party: Could anything be more fallacious? I^an we say he is not of us, when vithout him we would have to retire rom business? Can we look upon him iskance — as a third party, when we -ealize that he has made possible oui ndustrial and commercial existence? Maculay has said: "Of all inventions, ;he alphabet and the printing press ilone excepted, those inventions which ibridge distances have done most for :he civilization of our species." While a no less famous writer than Liord Bacon aptly said: There are hree things which make a nation rreat and prosperous; a fertile soil, a )usy workshop and easy conveyance or man and goods from place to )lace." I assume that every business man >elieves in the economic theory that ill industry and commerce, to sur- /ive, must be conducted at a reason - ible profit. I also assume that, in- lividually, every one of us is weak mough, or human enough, to buy any ;ommodity we may need at as low a jrice as we can impose upon the seller md— I blush to add — regardless of vhether that price is above or below ;ost of production — that is not our joncern, as we conceive it In an economic sense, the railways ire selling, and the shippers are buy- ng a commodity — transportation. And ■ight here arises the anomaly of the ;rans^ction. As individuals, when you sell and I buy, we are each of us vholly untrammeled by any dictation is to price other than your knowledge )n your part of your cost of produc- ;ion and for my own part, my knowl- edge as to the figrure at which I can secure the commodity elsewhere. Each jarty is a free agent, with discretion ;o act, and only limited by economio considerations. On the other hand, how different ivhen we, as shippers, buy from the •ailways; for here there are not two independent parties, with power to act. The function of negotiation, \u this instance, between these two ele- ments (seller and buyer) is vested by law in the Interstate Commerce com- mission. Sitting as a court of arbitration, so to speak, the commission fixes the price of transportation. Following the testimony of all parties at interest (and which merely comprises the two — the selling railway and the buying shipper) the "reasonableness" of a proposed rate is then determined by the commission. What does this rate, when it emerges from this pro- cess, really mean? Apparently, it means nothing defin- ite; for the railways are not secur- ing an adequate price for their com- modity — transportation, and the ship- per without knowing whether the price is fair or not, on general principles objects to it — on the assumption that it must be high, because he does not know to the contrary — so inherent is this instinct. Of necessity, these rates (while be- fore the commission) are discussed by representatives of large groups or classes of shippers, and who in most instances make the unhappy error of assuming that when, as a group, they bear down the rate for all hands round, that is for all shippers, they are benefiting themselves, in somewhat the same manner as that of one in- dividual as against another in an open competition. They completely over- look the fact that stability of trans- portation rates, like stability of com- modity prices, is of vastly more im- portance to them as shippers than tho level of rates themselves. These rates cannot remain stable unless they are equitable; for stability and equity are manifestly insepaisable in any form of continued activity, and particularly where the activity com- prises three such fundamental contrib- utory elements as production, sale and distribution. Imagine for a moment these three elements combined under one owner- ship arid management; would the exec- utive management of such an enter- prise maintain two of these elements on a sound economic basis, and saddle an insuperable burden upon the third? Would a corporation so conduct its op- erations as to permit two of its de- partments to prosper, while it impov- erished the third, and which would in- evitably impair the other two? And yet, the principle governing all three is, in an economic sense, the same un- der diverse ownership as it would be under sole ownership. The wisdom and policy of maintain- ing the integrity and stability of the 34 THE CENTRAL STATES CONFERENCE triple alliance thus becomes mani- fest. In these days of accelerated devel- opment, we are frequently made to realize that we are surrounded by forces or conditions vitally affecting our existence, but as to the effect of which we have been unconsciously ig- norant. We have spoken of the tripod. It so happens that there is another vital element, not so frequently known or recognized, but of vast importance, and really making it a quadruple al- liance. Singularly too, this fourth element proceeds from this same "ex- ternal partner" — the railway. One branch of the speaker's busi- ness has been in the railway equip- ment line. For many years it was noted that the first significant sign of a revival of general business, was railway buying — and its cessation one of the first signs of impending general recession. This became such a settled convic- tion, that a means of testing and demonstrating its accuracy was sought. A few years ago I had the curiosity to procure data from the well known Brookmire Economic Service, of St. Louis. On one occasion I said to Mr. Brookmire that I had the idea that if a chart could be constructed indicat- ing the curve up and down through the years of railway purchases on one line, and the volume of general busi- ness on the other line, it would be found that an upward turn on the rail- way purchase line was pretty regular- ly followed by an upward turn, of cor- responding magnitude, upon the gen- eral business line; and that when railway purchases went down, general business followed soon afterword. Mr. Brookmire proved to have a unit, measuring general business, based upon an average of a large num- ber of commodities. To compare rail- way purchases with this unit, we ar- bitrarily agreed that a representative figure would be "car orders," exper- ience having shown that when car orders rise or fall, this is accompanied by a closely corresponding fluctuation in the purchases of locomotives, and of the various products which are used in building and maintaining track and structures. When the chart was laid before me I was pleased to find that my pro- phecy had come true in an uncanny degree. Enormoua in bulk are the transactions of the railways. There Is hardly a commodity which the roads do not buy. To remove from the mar- ket railway purchases of almost any article, causes a readjustment in that particular industry. As our survey progresses into the industries, a large part or the whole of whose product is consumed by the car- riers, we observe two things: Fiii^t, that the readjustment amounts to a convulsion and prostration; second, that this piostration of industry im- mediately brings distress, and in some communities, disaster to every branrh of trade and manufacture. In other words, railway purchasing! power is so great a factor in total pur-l chasing power of the country that itsj instability spells general instability. Anything which affects the railways ad- versely is instantly communicated to| the whole business structure. From time to time I have thought iti worth while to have this chart broughtj down to date. In the fall of 1914. the! line indicating railway purchases sankj to a point lower than the point shown! at any time in 1908, the previous low! point for the period covered by the! chart, which begins with 1901. The! business index in 1914 followed the rail-l way purchasing index down, with about! three months interval, and reached al level lower than the low point in 1908.1 Before the end of the year the busin') (at Washington) : Hello. Mr. Kingsbury: Hello, Mr. Secretary. This is Mr. Kingsbury of the telephone company, Mr. Secretary. How are you? Hon. Josephus Daniels: Very fine, thank you. How are you? Mr. Kingsbury: First rate. I would like you to say a few words to Mr. W. H. McCurdy, President of the Hercules Buggy & Gas Engine Company, of Evansville, Indiana. Hon. Josephus Daniels: All right. Mr. W. H. McCurdy: Hello, Mr. Secretary. Hon. Josephus Daniels: How are you out there? Mr. McCurdy: Pretty well. How are you in Washington? Hon. Josephus Daniels: All right. Mr. McCurdy: We are having a fine time here. We are now assem- bled in the Central States Conference on Rail and Water Transporta- tion and we have had a very successful meeting. We, of course, missed you. We hope to be more successful another time. How are things over in Washington? Hon. Josephus Daniels: Things are very quiet here. Mr. McCurdy: I happen to have been made chairman of a commit- tee to secure the armor plate plant for Evansville and I hope soon to meet you as well as other Washington officials, for the purpose of laying before you all of our claims as impressively as possible. Hon. Josephus Daniels: Well, we expect to send a committee out to see what you have, what kind of territory 3^ou have. Mr. McCurdy: That will be all right. You will send the committee here to Evansville? Hon. Josephus Daniels: Yes. Mr. McCurdy: Well, we will give them a royal welcome and show them the advantages of locating the armor plate plant in our community. Hon. Josephus Daniels: Well, I know they will have a good time. Mr. McCurdy: Mr. Secretary, I hope you will take advantage of that opportunity and come along with them. Hon. Josephus Daniels: Well, I hope I can do so. I won't promise, but I will if I can. Mr. McCurdy: That will be very good. Do the best you can for us. Good night. Hon. Josephus Daniels: Good night. Mr. Kingsbury: Hello. Washington Operator: This is Secretary Lansing's residence. Mr. Kingsbury: All right. Hello. Hon. Robert Lansing: Hello. THE CENTRAL STATES CONFERENCE 123 Mr, Kingsbury: Hello, Secretary Lansing? Hon. Robert Lansing: Yes. Mr. Kingsbury: Mr. Samuel L. Orr of Evansville, Indiana, wants to say a few words, to you, sir. Hon. Robert Lansing: All right. Mr. Samuel L. Orr: Hello, Secretary Lansing. Hon. Robert Lansing: Hello, Mr. Orr. Mr. Orr: We have had a most successful conference and I am sure that you will be interested to hear how much we have all been benefited and I believe that the Conference will do a great good. As you are a citizen of Evansville by marriage we would like to have you honor us with a few remarks. Have you a message to send to us? Hon. Robert Lansing: Do you hear me? Mr. Orr: Yes. Hon. Robert Lansing: I want to express our very best wishes for a successful outcome of your Conference. The President is very much in- terested in your deliberations. We wish to congratulate the great cen- tral states on their industry and progress. While I cannot be with you in person I am with you in spirit. While I cannot meet with you in per- son I can do so across a thousand miles of wire. I believe that the prob- lems both in transportation and along other lines will be solved by mature deliberation. The railroads and waterways are the channels of commerce and are the great arteries of development, and their perfection in these complex times is well worthy of consideration. I wish to express my highest regard for the city of Evansville in undertaking a conference of this natiu-e. I Avish you success in your entei-prise and want to congratu- late you upon your conference. Mr. Orr: We thank you very much, Mr. Secretary. Hon. Robert Lansing. Thank you. Mr. Orr: Will you please extend to your good wife, Mrs. Lansing, the affectionate greetings of Evansville? Hon. Robert Lansing: I will be very glad to do so. Good night. Mr. Orr: Good night. Mr. Kingsbury: Hello. Washington Operator: This is Washington. This is Vice-Presi- dent Marshall's residence. Are you ready for him? Mr. Kingsbury: Yes, we are ready. Hon. Thomas R. Marshall: Hello. Mr. Kingsbury: Hello, Mr. Vice-President. This is Kingsbury of the Bell Telephone Company. Mr. Boehne, ex-Congressman from Indiana, would like to speak to you. Mr. Boehne is right here. Hon. John W. Boehne: Hello. Is this Mr. Marshall? Hon. Thomas R. Marshall: Yes. Hello, Mr. Congressman. Hon. J. W. Boehne: How are you to-day? Hon. Thomas R. Marshall: Very well, sir. Is the Conference in progress now? Hon. J. W. Boehne: The Central States Conference on Rail and Water Transportation has been in session two days and they send their greetings to the Vice-President of the United States. They would like to have you say a word to them. There are 500 guests here, connected by telephone, who are enjoying his treat through the courtesy of the Bell Telephone Company. We have just had a most elaborate banquet here. Now, we would like to hear a few words from you. Hon. Thomas R. Marshall: Mr. Congressman, t am a little em- barrassed. I don't know just what to say. I express my personal appre- J24 THE CENTRAL STATES CONFERENCE elation to all of the members present of the great task that they have had before them, and I want to congratulate the city of Evansville for its initiative in undertaking such a movement as that. The question has been particularly acute in the United States for the last number of months and we have been very much occupied with the discussion of the great question of transportation. That is one of the great problems confront- ing the American people and has to do with and has reference to the high cost of living. The high cost of living is partly induced by the fact that we have the people in one place and the products in another. The great difficulty is to bring them closer together. The question is whether we can bring the people to the products or whether the products can be brought to the people. This is not only an economic problem, but is also a social problem, to the solution of which the members of your Confer- ence do well to lend their best efforts, their best energy and their best thoughts. The only thing I want to say is that the more you can put into the appropriations for the improvements of the rivers and waterways of this country the better it will be for all concerned, because in that way we will be able to relieve part of the congestion. There can be no question of the expediency of improving our rivers. The present condi- tion of affairs does not arise from the fact that river transportation cannot be made possible and valuable to the people of this country, but it does arise from the fact that it cannot be made possible and valuable to the people of the country under the present conditions of the law. So all I can ask of the government of the United States is to permit the railroads to meet and to lower the rates of transportation. We must do everything to arouse enthusiasm over the improvements of the rivers of this country. , It is perfectly natural that the people will ship by rail and not by water, because of the greater expediency at this time when the railroads are used than when the waterways are used in their present condition. It is also perfectly natural that, when the waterways are improved, with the cheaper rates they will afford, whatever traffic can be sent over them will go via the waterways rather than by the railways which parallel, unless the rates on the two are equal. It seems to me, therefore, that there must be some adjustment made between the railroads and the rivers of this country, that they must be co-ordinated and that, either through the instrumentality of the states or the instrumentality of the general gov- ernment, there must be a control somewhere of the rivers and the rail- roads of his country; and that there must be power given to fix their se- curities and to enable us to use as much as we possibly can the great natural highways of the country, the mighty rivers that flow in all direc- tions through this United States of America. Now, I am an old-fashioned democrat. I don't want to take away from the various states of this Union any of the rights that belong to them, but it seems to me that it would be to the advantage of the various states as well as to the people of the whole country that there be one controlling body over the railroads of the whole country. I hope that the conditions of America Avill not necessarily be changed by the new conditions in the markets of the world, but it is a fact that, unless the various states in this Union will assume the responsibilities which they owe to all of the states, and take the necessary steps to induce the people to use both the railroads and the waterways in the transportation of not only the food products, but all of the manufactured products of all of the states of this Union, there must be one central controlling body, and that the different states acquiesce in the opinion of that commission which would have the control over all the waterways and railways. Now, I am most delighted to know that in the very grand and pros- perous city of Evansville there has been held a Conference, the members of which are firmly convinced of the necessity of studying this problem which confronts the whole nation, and that that Conference has been called with that one object in view. I trust that that Conference has heard all sides of the question, and that they will give careful considera- THE CENTRAL STATES CONFERENCE 125 tion to the questions involved before any action is taken, and that what- ever action is taken will be for the best interests of all the people of this country. Now, for myself, I would be opposed to any legislation unless that legislation could be backed up by the deliberate judgment of all the people. I believe in a very large amount of discussion on any subject. I doubt if the views of all sides can be expressed by any one party or by anybody and everybody who may happen to be at the convention. I hope that no one will refrain from speaking for fear of not meeting with the approval of some in the convention, biit that everybody will talk. I trust that your deliberations, which will no doubt become known to all of the people of all of the states of this country, and which will no doubt be crystalized into some set of resolutions, will help to solve for the American people the great transportation problem of this country, Hon. J. W. Boehne: Mr. Marshall. Hon. Thomas R. Marshall: Yes, sir. Hon. J. W. Boehne: I would like to say that I had the great pleasure of talking to you tonight as though I were with you in person, instead 01 a thousand miles apart, and I want to extend to you and Mrs. Marshall the best wishes, not only of myself but of my entire family. How is Mrs. Marshall? Hon. Thomas R. Marshall: She is well, but not strong, Mr. Congress- man; and I hope you will extend to the members of the Conference my best wishes and greetings, and explain to them that it was somewhat difficult to speak over the telephone, that my views with reference to transporta- tion are not fixed, but that they are only tentative. I am at a loss to know what we may do in this great problem. I want you to give my greetings to all members of your good family, to all the people of Evansville, and the delegates to the convention. Hon. J. W. Boehne: Thank you, very much. I wish to say that we would like to have you extend to the President the greetings of this con- vention, and to thank him in behalf of this convention assembled for his kind message to us. I hope to pay my personal respects to him and to you as well as to the others in Washington within a very short time. Hon. Thomas R. Marshall: I will gladly convey your kind greet- ings to the President, and I want to thank you very much for your well wishes. Hon. J. W. Boehne: Well, good night and good luck to you. Hon. Thomas R. Marshall: Good night. Mr. Kingsbury: Hello. Give me the transcontinental with San Francisco. Mr. Hunter: (San Francisco.) This is San Francisco, Hunter speak- ing, Mr, Kingsbury. Mr. Kingsbury: Hello, Mr. Hunter. Have you got the window open there? Mr. Hunter: (San Francisco.) Yes. Mr. Kingsbury: How is the Pacific tonight? Mr. Hunter: (San Francisco.) The Pacific is rather quiet but there are some waves on it. TVIr. Kingsbury: I don't think it is wavy enough tonight for us to hear. When are you ready for us? Mr. Hunter: (San Francisco.) Right now, anytime. Mr. Kingsbury: All right. Let us have the roar of the Pacific and we will have moving pictures to show where the roar comes from. Mr. Hunter: (San Francisco.) All right. Mr. Kingsbury: (To audience.) Pictures will be thrown on the screen to show where the roar is taken in the Pacific, down at the Cliff 126 THE CENTRAL STATES CONFERENCE House in San Francisco. A telephone receiver Is placed on the pier at the Cliff House. Can you hear the roar of the waves? Moving pictures were shown, showing the Pacific coast and the waves breaking on the shore, while the roar of the waves was distinctly heard by the conference over the telephone. Mr. Kingsbury: Hello. Mr. Hunter: (San Francisco.) Hello, Mr. Kingsbury. Mr. Kingsbury: Now, will you give us the Star Spangled Banner? The Star Spangled Banner was played in San Francisco and heard by the Conference over telephones. Mr. Kingsbury: Hello, San Francisco. Mr. Hunter: (San Francisco.) This is San Francisco. Mr. Kingsbury: Good night, Mr. Hunter. Mr. Hunter: (San Francisco.) Good night, Mr. Kingsbury. "Good night" was then said to each city on the line across the con- tinent. Mr. Kingsbury: Last, but not least, Hello Evansville! Mr. Gibbs: (Evansville.) This is Evansville, Mr. Kingsbury. Good- night. Mr. Kingsbury: Good night. Thank you very much. (Continued applause.) Mr. Henry C. Murphy: Mr. Toastmaster, gentlemen of the Confer- ence and ladies: I want to move the heartiest vote of thanks to Mr. Kingsbury, to Mr. Hobson, to Mr. Brown, to Mr. Webb and their associates in the American Bell System for their wonderful kindness in giving us this marvelous demonstration. Hon. Benjamin Bosse: I want to second the motion.. Mr. Henry C. Murphy: Mr. Hobson is the toastmaster and modesty would prevent him from putting the motion himself. I ask you all to say "aye". The motion was unanimously carried. (Applause.) The Toastmaster: In behalf of Mr. Kingsbury, Mr. Brown and Mr. Webb and our company employes, I thank you very much, Mr. Murphy, for your motion and you, ladies and gentlemen, for your hearty accord. (Applause.) Gentlemen, as I told you when the resolutions reported by your reso- lutions committee were introduced, we do not wish to pass any resolu- tions, voicing this Conference's sentiments, which do not meet with the full approval of the Conference. If the gentleman who rose to object to that clause in the resolutions, will merely state his objection, if the Con- ference wishes, that clause will be stricken from the resolutions. We do not purpose to pass any resolutions which do not meet with practically the unanimous consent, or the approval of a very large majority of the delegates who attended this Conference. Hon. Benjamin Bosse: May I offer a substitute, Mr. Toastmaster? The Toastmaster: You want to offer a substitute for the resolutions? I promised Mr. Finn to give him the floor first when the resolutions were under consideration. The Mayor has asked that he be permitted to sub- stitute. Hon. Benjamin Bosse: May I have the floor now, Mr. Chairman? The Toastmaster: You may. Have you a substitute? Hon. Benjamin Bosse: Yes, sir. The Toastmaster: The Mayor wishes to offer a substitute. Perhaps that, Mr. Finn, will meet your views. Then I will call on you and you can say what you please. THE CENTRAL STATES CONFERENCE 127 Hon. Benjamin Bosse: The members of the committee on resolu- tions beg to offer a substitute for paragraph six of the resolutions as read. We beg to offer this substitute: "We favor the adoption of more prompt, efficient methods by which discriminations between rates established by state and federal authority may be eliminated," instead of the following: "We favor federal regulation of railroad rates, authority to be vested with the Interstate Commerce Commission witli regional sub-commissions sitting in various traffic districts and that this regulation follow the natural lines of commerce and not the artificial lines of states." Mr. Lawrence Finn: Mr. Toastmaster. The Toastmaster: Mr. Finn of Kentucky. Mr. Lawrence Finn: There are two things which I have accom- plished by my objection: The first is that the resolutions have not been adopted until tomorrow by Washington time; the next is that they have been amended. Another proposition that I desire to call to your attention is this: That in this peaceful assembly where quietude and serenity reigns su- preme but one nationality on earth would raise one note of discord, and that is the Irish. I am an Irishman. (Laughter.) There are some won- derful things that have happened here tonight to which I desire to call your attention. I heard one gentleman talking over the telephone, and I want you to get the intonation that I place upon my voice, which is but a repetition literally of that intonation that he placed upon his voice. He said that he was a "Hughesa". He should have said that he was a "Hoosa" and not a "Hughesa". Another gentleman who spoke here this evening said that it would only take one spoon of water to operate the telephone for an indefinite length of time. I tell you that I have here before me the positive proof that it takes almost an ocean of oxygen and hydrogen to operate the rail- road systems of this country. The proposition, Mr. Toastmaster, before this convention is simply this, resolved to its last analysis, that all control of common carriers shall be centralized in the federal government. And why? Because common carriers in this country operate under state charters. Those state charters provide what? Thirteen states of this Union, from which ninety per cent, of the railroads received their char- ters, under which they had their existence, provide that no corporation shall issue stocks and bonds except for an equivalent of money paid, only upon property actually received and applied to the purposes for which said corporation was created, and that little or no water shall be received in payment of stocks or bonds. Why do the common carriers want a federal incorporation act? Not to be relieved of the conflict between the several states, as has been stated here. I will show you, my friends, that that is not true. The Louisville & Nashville Railroad Company operates through the states of Kentucky, Illinois, Georgia, North Carolina, Virginia, Tennessee, Alabama, Florida, Louisiana and Mississippi. All of these states have railroad commission regulating the Louisville & Nashville Railroad Company any yet, my friends, the Louisville & Nashville Company earned a return in 1916 equal to 19.4% upon its capital stock. They tell us that the railroad companies are limited in their earning capacity. I defy a single individual in the State of Kentucky to loan his money and collect exceeding six per cent. If he tries to and goes to court about it, you can declare the excess usury and refuse to pay it. I will only call your attention to the fact that the Chicago, Milwaukee & St. Paul Railroad Company runs through ten states, Illinois, Wisconsin, Michigan, Minnesota, Iowa, Missouri, North Dakota, South Dakota, Mon- tana, Idaho and Washington, and notwithstanding the fact that it runs through all of these states the Chicago, Milwaukee & St. Paul Railroad Company in 1916 earned 16.32 per cent, upon its capital stock. 128 THE CENTRAL STATES CONFERENCE My friends, I could continue these illustrations almost indefinitely, but I wiint to show you here tonight that there is but one object of the common carrier, and what is that? Federal incorporation. Why? Be- cause so long as they receive their state charters they are bound by the limitations of the very law that gives them their existence. The Inter- state Commerce Commission today is spending millions of dollars to value the railroads of the country. They have thousands of employes in the field — for what purpose? Both political parties in this country declare that the stocks and bonds of the railroad companies represent a fictitious valuation. Woodrow Wilson was elected upon a platform that declared in favor of the valuation of corporations, and if you will read the cam- paign book that was issued by his national committee, placed into the hands of democratic speakers that were to go before the nation and edu- cate the public, you will find therein that everyone of W^oodrow Wilson's campaign managers declared to the public that there were $9,500,0000,000 of watered stock in the railroads of this country. Now, Mr. Toastmaster.-all I ask of you, and all I ask the gentlemen here tonight, is this: First, I say that today and yesterday, you have been criticising the politicians of this country. Why? Because they acted in haste. You say that you are a band of business men here today. I ask you if you are a band of business men assembled here for the purpose of coming to some conclusions as a result of investigation, do not act hastily. Do not act with haste, but act with that self-same, deliberate judgment, which ought to characterize an assembly of business men and which you said in your criticism should characterize the demagogue and the politician. Another proposition that I ask is that when you put this vote tonight is that you separate the vote. Let tliose who are stockholders and em- ployes of the railroad companies vote upon this proposition seperately. Exclude the railroad commissioners and take a separate vote from them. Let the unbiased public that pays the freight rate also vote upOn this proposition, so that the public will know where the sentiment is that prompted the vote upon the resolutions that have been offered here. (Ap- plause.) (Calls for question.) The Toastmaster: Gentlemen, the question is called for. Is there any further debate or shall the question be put. Mr. Robert Bonham: What is the question? The Toastmaster: The question before the house is on the adoption of the resolution offered by the resolutions committee as amended by the committee. Upon the motion being put to a vote the ayes were declared to have it and the motion declared carried. (Applause.) The Toastmaster: Gentlemen, we thank you very much for your at- tention. The Central States Conference on Rail and Water Transportation is now adjourned. T I 3 0112 062147415